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Trump-led oil & gas export boom may fold in Europe trade spat: Maguire

Oil and gas producers in the United States expect to discover it easier to ramp up output and exploration under the inbound second administration of Donald Trump. Finding local and profitable markets for their products might be the bigger difficulty.

Producers expect the new administration to improve permit procedures connecting to nonrenewable fuel source extraction and circulation that ought to lead to a climb in U.S. oil and natural gas output, which is already at record highs.

That bodes well for firms that export melted natural gas, petroleum and refined fuels and will likely encourage even more growth in U.S. export capacity of those products.

However, energy exporters also run the risk of getting caught in trade-related crossfire needs to Trump's plan to impose steep tariffs on a multitude of imported items set off vindictive actions in consumer markets.

EUROPEAN TARGET

European nations are particularly most likely to be targeted with tariffs by the inbound administration as the enduring U.S. trade deficit with Europe - around $240 billion annually - is a. major irritant for Trump allies.

President-elect Trump said last month that Europe would pay. a big rate for not buying adequate American exports and has. threatened to impose blanket tariffs on European goods.

However, Europe is likewise the single largest market for both. U.S. LNG and crude oil exports, representing 49% of all U.S. LNG shipments and 47% of U.S. crude exports this year, according. to ship-tracking information from Kpler.

Considering that Russia's invasion of Ukraine in 2022, Europe has had. to import record volumes of fuels and oil from other providers,. and the U.S. has been the primary beneficiary by shipping. record volumes of those commodities.

In 2023, U.S. LNG export earnings was over $30 billion and. two-thirds of all U.S. LNG shipments went to Europe, according. to the U.S. Energy Information Administration and Kpler.

The U.S. exported around $10 billion of crude oil in 2023,. with simply under half sent out to Europe, EIA data showed.

BIG MONEY

Those U.S. LNG and oil deliveries have actually led to a revenue. boom for U.S. exporters and valuable tax revenue for the U.S. Treasury which the next administration will wish to secure.

Nevertheless, the high price tag of energy imports has likewise injured. European customers and is accelerating Europe's energy. transition far from nonrenewable fuel sources.

A slowdown in financial activity has also suppressed industrial. gas use and power intake and has actually set off a more than 20%. drop in Europe's LNG imports over the first 10 months of 2024. from the exact same period of 2023.

Europe's imports of U.S. crude oil have actually reached a record. up until now in 2024 however the continent's overall crude imports have. contracted by around 1%, showed information from Kpler.

This indicates that European energy item importers have. scope to decrease purchases of U.S. LNG and unrefined as overall gas. usage remains stunted while unrefined materials from alternative. sellers are plentiful.

IN THE CROSSHAIRS?

European policymakers are currently planning actions to. Trump's intended tariff impositions, cautious of a potential. degeneration in financial ties with a key trade partner while. embroiled in a trade spat with China.

Trade professionals in Brussels - home to the European Union's. policy arm - will want to prevent any additional souring in the. region's economy and will likely seek to keep strong ties. with the U.S. during Trump's next term.

However, they will not shy away from proposing tariff. measures of their own throughout settlements, if only to prevent. being steam-rolled by blanket tariff dangers from the U.S.

U.S. energy products are likely to be an appealing option. for vindictive tariffs as Europe can readily source LNG and oil. from other keen sellers and thereby injured U.S. suppliers without. harming their own customers.

U.S. THREAT

On paper, U.S. energy item exporters could redirect. freights to other buyers if Europe somehow ends up being shut off. during a trade scuffle.

But in reality, the loss of European buyers would be a heavy. blow to U.S. companies, particularly LNG exporters.

All current U.S. LNG export terminals are located on either. the East Coast or in the U.S. Gulf therefore are much better positioned to. service a Pan-Atlantic trade path than throughout the Pacific to. purchasers in Asia.

The U.S. to Europe journey is also only a fraction of the. distance and time to major purchasers in Asia.

The approximately 12-day journey from Cove Point LNG terminal in. Maryland to Wilhelmshaven in Germany - a significant European LNG. import hub - is a third of the time of the journey to Guangdong in. China, the world's biggest LNG purchaser.

Longer journeys imply longer turnaround times for LNG. sellers, who require fast vessel turnover to maximise earnings.

So while U.S. sellers might probably maintain total export. volumes by redirecting freights if Europe ended up being off limits, they. would more than likely sustain greatly higher shipping expenses and longer. return times if they had to go to Asia instead.

Crude sellers would deal with similar issues if European buyers. likewise selected other sellers as global oil consumers are already. well served by exporters from the Middle East and elsewhere.

This indicates that while U.S. energy exporters can anticipate to. boost output volumes under the next administration, they likewise. deal with a growing danger of a trade skirmish with key European buyers. that may make selling those extra volumes a challenge. << The opinions revealed here are those of the author, a. writer .>

(source: Reuters)