①The EU previously committed to purchasing $750 billion worth of U.S. energy over the next three years, but the latest data suggests this commitment is unlikely to be fulfilled; ②Over the past four months, the EU's spending on U.S. oil and natural gas has decreased by 7%, primarily due to declines in oil and gas prices; ③Some argue that the economic rationale behind this transatlantic trade agreement is lacking, seemingly serving only as a means to buy time regarding tariffs.
Despite the EU's earlier commitment to Trump during U.S.-EU trade talks earlier this year to purchase $750 billion worth of U.S. energy over the next three years, the latest available data indicates that this pledge is unlikely to be met.
According to estimates from energy consultancy Kpler, the EU imported $29.6 billion worth of liquefied natural gas and oil from the U.S. between September and December, representing a 7% reduction in spending on U.S. oil and natural gas over the past four months.
Kpler’s data shows that although the volume of liquefied natural gas (LNG) purchased by the EU from the U.S. has increased since the trade agreement was reached in August, falling oil and gas prices have led to a decline in total imports over these four months compared to the same period last year.
In this regard, Gillian Boccara, Senior Director at Kpler, pointed out that this non-binding trade agreement did not prompt the EU to increase its procurement of U.S. commodities.
She noted that commodity purchases are negotiated bilaterally and are primarily driven by economic factors such as freight costs and profit margins, rather than political commitments. She further added that the EU’s purchasing commitment is “unrealistic.”
Energy Commitment Difficult to Achieve
Currently, the EU’s total annual energy imports amount to $73.7 billion. Based on this figure, the total import value for 2026 to 2028 would be less than one-third of the $750 billion energy procurement commitment.
Therefore, to fulfill this commitment, natural gas prices would need to quadruple from current levels to reach $37.3 per million British thermal units (MMBtu) by 2028 (the last time this price level was seen was in December 2022 during the Russia-Ukraine conflict-induced energy crisis). However, this scenario contradicts market expectations.
Market expectations suggest an oversupply of natural gas in the coming years, leading to lower prices, as countries including the U.S., Qatar, and Canada plan to ramp up production. Additionally, the possibility of a Russia-Ukraine ceasefire has also dampened market sentiment.
Data from the price reporting agency Argus Media shows that natural gas futures prices for 2028 are approximately $8.2 per million British thermal units, compared to about $10 per million British thermal units currently.
The agreement lacks rationality.
Regarding projections that run counter to commitments, Boccara of Kpler stated that even if the EU completely replaces Russian natural gas with American natural gas, it would not triple import volumes. She added, "Aside from the aim of reducing U.S. tariffs, we cannot accept any other reasonable explanation. We simply do not see how the numbers add up."
The Argus report also noted that if the EU were to fully replace Russian natural gas with American liquefied natural gas, the average annual import volume over the next three years might be approximately $29 billion, representing only 23% of the amount stipulated in the agreement.
Moreover, Martin Senior of Argus believes that both the EU and the U.S. lack sufficient import and export infrastructure, such as storage tanks and regasification systems, making it difficult to significantly expand energy trade.
He stated that the EU needs to increase its import capacity by more than 50%, while the U.S. must double its export capacity to fulfill the trade agreement.
A former member of the European Parliament with extensive experience in energy policy indicated that due to the lack of economic rationale, the agreement appears to be a tactic employed by the EU to buy time, delay direct confrontation with the U.S. President, and simultaneously strengthen its defense against Russia.
Editor/Doris