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A guide to what the 2024 US election means for Washington and the world.
President-elect Donald Trump famously wants to make America great again. But at least one of his policy ideas has the potential to give European industry an advantage as well.
President Trump has vowed to refrain from “drill, baby, drill” and encourage upstream production. He is also expected to lift a moratorium on licensing new liquefied natural gas export facilities that was put in place during President Joe Biden’s administration.
These measures will have an incremental rather than a revolutionary impact. U.S. natural gas production has increased by nearly half over the past decade to a record level of about 125 billion cubic feet per day. Loyalties, compliance, and cost reductions could provide additional incentives for drillers, but increases will be limited by downward pressure on oil and gas prices.
Meanwhile, a “temporary suspension” of new licenses for LNG terminals affected early-stage projects. Although the reversal will not have an immediate impact, there is no doubt that the outlook for an increase in LNG supply will become stronger in the medium term. Wood Mackenzie estimates that approximately 90 million tonnes per year (mtpa) of U.S. projects are awaiting export approval.
This is important because all this takes place in the context of an LNG market that is already bracing for oversupply. According to Bernstein’s analysis, projects with a production capacity of 130 tons per year are expected to come online between 2025 and 2027, representing 33 percent of existing LNG production capacity.
This figure is lower than estimates, as projects have been hit by delays and complications. However, demand growth is still much higher than expected over this period. It is fully expected that this flood of supercooled fuel will hit the shores of Europe, causing prices to fall.
Market forces are therefore conspiring to provide Europe with cheaper gas, at least for a while. Geopolitics raises further questions. President Trump’s campaign included a pledge to quickly end the war between Russia and Ukraine. Questions remain about the next president’s ability to do this. It will have significant consequences, but energy is only one of them, given Russia’s vast gas reserves.
Markets will remain volatile over the next year or so, especially if Europe experiences a period of cold weather. European gas demand remains well below pre-crisis levels, although LNG supplies remain quite tight given delays and power outages. But if you look beyond that, the supply is still there, and in even greater quantities.
For European industries facing tariffs, particularly energy-intensive industries such as chemicals and steel, the prospect of lower energy prices over the medium term will provide some relief.
camilla.palladino@ft.com
