{
"authors": [
"Judy Dempsey"
],
"type": "commentary",
"blog": "Strategic Europe",
"centerAffiliationAll": "",
"centers": [
"Carnegie Endowment for International Peace",
"Carnegie Europe"
],
"collections": [],
"englishNewsletterAll": "",
"nonEnglishNewsletterAll": "",
"primaryCenter": "Carnegie Europe",
"programAffiliation": "",
"programs": [],
"projects": [],
"regions": [
"Europe",
"North America"
],
"topics": [
"Climate Change",
"EU"
]
}
Source: Getty
The United States is becoming self-sufficient in gas. Europe needs to change if it is to avoid a dramatic loss of competitiveness.
The first afternoon session at the Munich Security Conference was called “The American Oil and Gas Bonanza: The Changing Geopolitics of Energy.” What a fascinating subject. And what a great title for a panel discussion. It lived up to it.
Daniel Yergin, a veteran energy expert, moderated the session. He kicked off with the argument that, as the United States becomes self-sufficient, at least for gas, the impact on its economy is huge.
For one thing, American industry will become more competitive. With easy access to gas and no dependency on gas imports, the advantages for industry, especially the intensive-energy sectors, are immense.
This is good news for the Obama administration.
As Aleksandr Novak, Russia’s energy minister pointed out, reduced energy imports can help the American current account and the trade deficit. Apart from that comment, Novak seemed completely confident that the changes in the United States would not upset the close energy ties between Europe and Russia.
He may be mistaken. The growing American energy self-sufficiency has very serious consequences for Europe, as the discussion in Munich showed.
There is already a big gap between Europe and the United States over defense expenditure and defense capabilities. Now imagine a widening transatlantic gap over competitiveness, too, caused by cheaper and more secure energy supplies. The panelists had no doubt that this will come to be, sooner rather than later.
As the United States surges ahead with fracking, the term for extracting shale gas, and building liquefied natural gas refineries, European industry will be left behind in terms of competitiveness.
There are two reasons for this.
First, European consumers and industry pay much higher prices for their energy. Second, the EU has no long-term energy strategy aimed at tapping the bloc’s own resources.
Philipp Rösler, Germany’s economy minister, even suggested that European industry might move to the United States where energy prices are cheaper.
“Many European companies have decided to invest in the United States because of low electricity costs,” he said. “I’m very concerned about how high energy prices affect Germany’s competitiveness.”
And so he should be. Germany is one of the world’s leading export-driven economies.
Jorma Ollila, chairman of the board of directors of Royal Dutch Shell pulled no punches, either. “If Europe fails to develop further its own oil and gas resources,” he said, “it could find itself at a competitive disadvantage.”
Europeans are divided over shale. France has imposed a moratorium due to environmental concerns. Britain, Poland, and other East European countries are pro-shale. Germany has yet to make up its mind. But at least Europeans are building liquefied natural gas terminals to import gas from the United States, Qatar, and Algeria.
Europe, in fact, should be in a very strong position to obtain lower energy prices. At the moment, the big energy companies have long-term contracts with Gazprom, Russia’s giant state-owned energy company. Novak made it clear that Russia was not keen to renegotiate those contracts, arguing that energy companies needed a return on their investment.
“Europe continues to be a strategic partner, and in view of the EU’s dependence on imports, consumption will grow,” he said. “This is an opportunity for us to broaden and intensify our strategic partnership with Europe."
Novak, of course, is wrong. The emergence of shale gas and liquefied natural gas means the complete opposite for Europe: it presents a unique opportunity to lessen European dependency on Russian energy supplies. And if Europe manages to put its own resources to use, it has a fantastic opportunity now to close the gap in competitiveness with the United States before it can become threatening to its industry.
Carnegie does not take institutional positions on public policy issues; the views represented herein are those of the author(s) and do not necessarily reflect the views of Carnegie, its staff, or its trustees.
EU member states clash over how to boost the union’s competitiveness: Some want to favor European industries in public procurement, while others worry this could deter foreign investment. So, can the EU simultaneously attract global capital and reduce dependencies?
Rym Momtaz, ed.
Leaning into a multispeed Europe that includes the UK is the way Europeans don’t get relegated to suffering what they must, while the mighty United States and China do what they want.
Rym Momtaz
A prophetic Romanian novel about a town at the mouth of the Danube carries a warning: Europe decays when it stops looking outward. In a world of increasing insularity, the EU should heed its warning.
Thomas de Waal
The EU lacks leadership and strategic planning in the South Caucasus, while the United States is leading the charge. To secure its geopolitical interests, Brussels must invest in new connectivity for the region.
Zaur Shiriyev
In return for a trade deal and the release of political prisoners, the United States has lifted sanctions on Belarus, breaking the previous Western policy consensus. Should Europeans follow suit, using their leverage to extract concessions from Lukashenko, or continue to isolate a key Kremlin ally?
Thomas de Waal, ed.