What is the single biggest advantage that Russia has when it comes to dealing not only with Ukraine, but also with the rest of Europe? The answer is simple: natural gas. Pipelines from Russia supply roughly a third of all of the natural gas used in Europe. Sales of the fuel give Russia a huge international income. The gas also gives Russia the ability to threaten shutting down the pipelines. Remember, if Russia stops the flow of gas, it stops getting income. That is bad enough. Remember, however, that if Russia stops the flow of gas, homes across Europe will go cold, factories will stop working, businesses will close and the hardships will be enormous. The cost is so great to Europe that it will just go on funneling money to Russia which Putin can then use to support his adventures in rebuilding the Russian Empire.
America has it in its control to take this major advantage away from the Russians. Since the development of shale gas, the USA has become the largest producer of natural gas in the world. Furthermore, America has enormous reserves of natural gas that can be developed. Just one of the new fields, the Marcellus Shale is estimated to have sufficient reserves to power all needs of the USA for the next sixty years, and that ignores the other huge reserves that exist around the North American continent. We literally have many centuries of fuel under our feet and easily accessible. Because we have so much natural gas, the price per unit in the USA is around $4.30 at the moment. In Europe, the same amount of natural gas is about ten dollars more, or more than triple the price here. Obviously, that price differential is enough that every buyer in Europe would rather purchase low cost American gas over high cost Russian or other gas.
The problem with selling American natural gas to Europe is transportation. The gas that comes to Europe from Russia travels through pipelines across land. There are no pipelines from North America to Europe and it is not feasible to build one. Instead, gas from America could be shipped to Europe as liquefied natural gas commonly called LNG. Plants would be built in America to remove impurities from the gas and then to cool it until it condenses into liquid. That liquid would then be loaded aboard refrigerated ships and sent to terminals in Europe where the LNG would be offloaded and converted back to gas.
The technology for conversion, shipment and reconversion of LNG is not new. There are plants and ships around the world that are already in use. What would be new would be the large scale application of the technology to ship LNG from the USA to Europe.
The use of LNG technology to send gas to Europe is feasible. The next question that must be addressed, however, is whether or not the process makes economic sense. A terminal to prepared the LNG and load it onto ships is a very expensive installation to build and operate. Depending on the capacity of the plant, a terminal of that sort could cost between 5 and 10 billion dollars. Then there is the need for the special ships to transport the LNG, another costly investment. Finally, there must be terminals in Europe to offload and convert the LNG back to regular natural gas. Estimates are that the cost per unit would be in the area of $4 just for this process. Of course, with American gas being about ten dollars less per unit than European gas, it would be easy to cover this transportation cost.
Let's consider the impact this process would have on Europe. There would be a new source of natural gas for that continent which could be profitably sold at prices much, much lower than the current one. The inflow of this less expensive gas would have two major effects on Russia: first, it would reduce the amount of gas sold by the Russians each day, and second, it would reduce the price being paid by the Europeans to the Russians for each unit of gas. These changes would deprive Putin and Russia of the funds needed to pay for their imperial ambitions. It would be a heavy blow. The Europeans would have a reliable alternative to the Russian fuel, something that might free them to act to support the countries threatened by Russian imperialism. The reduction in fuel costs would also help improve the European economies and thereby the world economy.
In America, there would also be major impacts. There would be a number of LNG terminals built in new ports along the Eastern seaboard. Just imagine how many jobs would be created to construct five of these massive installations at a cost of $10 billion each. Remember also, that the cost of these terminals would be funded by private investors; the government would not have any expense in the construction. Once the plants were built, they would have to be operated, something that would create thousands of jobs as well. On top of this would be the huge numbers of jobs created as the gas producers drilled wells across the country in order to supply these new terminals. Once the projects reached full size and operation, there could be as many as half a million additional jobs across the country just due to these exports. Then there is all the wealth created by producing and selling the natural gas. Landowners across the various gas fields would be getting billions of dollars of royalties from the gas sales. Just think how many small farmers and others in Ohio and Pennsylvania, not to mention ranchers in Texas and Oklahoma and others who would share in this wealth. The oil and gas companies would also earn large profits. These companies are owned mostly by pension funds, universities and retirement plans. Their profits would benefit tens of millions of people. Then there is the major impact on America's balance of payments. Our trade in energy products could go from a huge outflow for oil to an inflow once the natural gas payments were added to the mix. It would be a major boost to America's economy.
On the negative side for America, the price of natural gas would probably rise a bit here as the added demand for gas to supply the LNG terminals would keep prices higher than otherwise. America's reserves are so great, however, that this effect would be minor. As the price of gas fell in Europe, the American advantage in energy costs would be reduced somewhat as well, another negative. Natural gas here, however, would always be substantially less expensive than in Europe since American gas would not need to cover the cost of transportation of LNG like the European counterpart.
Overall, having American natural gas exported to Europe would bring major economic benefits to the USA. It would bring similar benefits to Europe. It would deprive Russia of its single largest source of earnings and its single biggest weapon against the rest of Europe. On every front, it is a winning measure.
America has it in its control to take this major advantage away from the Russians. Since the development of shale gas, the USA has become the largest producer of natural gas in the world. Furthermore, America has enormous reserves of natural gas that can be developed. Just one of the new fields, the Marcellus Shale is estimated to have sufficient reserves to power all needs of the USA for the next sixty years, and that ignores the other huge reserves that exist around the North American continent. We literally have many centuries of fuel under our feet and easily accessible. Because we have so much natural gas, the price per unit in the USA is around $4.30 at the moment. In Europe, the same amount of natural gas is about ten dollars more, or more than triple the price here. Obviously, that price differential is enough that every buyer in Europe would rather purchase low cost American gas over high cost Russian or other gas.
The problem with selling American natural gas to Europe is transportation. The gas that comes to Europe from Russia travels through pipelines across land. There are no pipelines from North America to Europe and it is not feasible to build one. Instead, gas from America could be shipped to Europe as liquefied natural gas commonly called LNG. Plants would be built in America to remove impurities from the gas and then to cool it until it condenses into liquid. That liquid would then be loaded aboard refrigerated ships and sent to terminals in Europe where the LNG would be offloaded and converted back to gas.
The technology for conversion, shipment and reconversion of LNG is not new. There are plants and ships around the world that are already in use. What would be new would be the large scale application of the technology to ship LNG from the USA to Europe.
The use of LNG technology to send gas to Europe is feasible. The next question that must be addressed, however, is whether or not the process makes economic sense. A terminal to prepared the LNG and load it onto ships is a very expensive installation to build and operate. Depending on the capacity of the plant, a terminal of that sort could cost between 5 and 10 billion dollars. Then there is the need for the special ships to transport the LNG, another costly investment. Finally, there must be terminals in Europe to offload and convert the LNG back to regular natural gas. Estimates are that the cost per unit would be in the area of $4 just for this process. Of course, with American gas being about ten dollars less per unit than European gas, it would be easy to cover this transportation cost.
Let's consider the impact this process would have on Europe. There would be a new source of natural gas for that continent which could be profitably sold at prices much, much lower than the current one. The inflow of this less expensive gas would have two major effects on Russia: first, it would reduce the amount of gas sold by the Russians each day, and second, it would reduce the price being paid by the Europeans to the Russians for each unit of gas. These changes would deprive Putin and Russia of the funds needed to pay for their imperial ambitions. It would be a heavy blow. The Europeans would have a reliable alternative to the Russian fuel, something that might free them to act to support the countries threatened by Russian imperialism. The reduction in fuel costs would also help improve the European economies and thereby the world economy.
In America, there would also be major impacts. There would be a number of LNG terminals built in new ports along the Eastern seaboard. Just imagine how many jobs would be created to construct five of these massive installations at a cost of $10 billion each. Remember also, that the cost of these terminals would be funded by private investors; the government would not have any expense in the construction. Once the plants were built, they would have to be operated, something that would create thousands of jobs as well. On top of this would be the huge numbers of jobs created as the gas producers drilled wells across the country in order to supply these new terminals. Once the projects reached full size and operation, there could be as many as half a million additional jobs across the country just due to these exports. Then there is all the wealth created by producing and selling the natural gas. Landowners across the various gas fields would be getting billions of dollars of royalties from the gas sales. Just think how many small farmers and others in Ohio and Pennsylvania, not to mention ranchers in Texas and Oklahoma and others who would share in this wealth. The oil and gas companies would also earn large profits. These companies are owned mostly by pension funds, universities and retirement plans. Their profits would benefit tens of millions of people. Then there is the major impact on America's balance of payments. Our trade in energy products could go from a huge outflow for oil to an inflow once the natural gas payments were added to the mix. It would be a major boost to America's economy.
On the negative side for America, the price of natural gas would probably rise a bit here as the added demand for gas to supply the LNG terminals would keep prices higher than otherwise. America's reserves are so great, however, that this effect would be minor. As the price of gas fell in Europe, the American advantage in energy costs would be reduced somewhat as well, another negative. Natural gas here, however, would always be substantially less expensive than in Europe since American gas would not need to cover the cost of transportation of LNG like the European counterpart.
Overall, having American natural gas exported to Europe would bring major economic benefits to the USA. It would bring similar benefits to Europe. It would deprive Russia of its single largest source of earnings and its single biggest weapon against the rest of Europe. On every front, it is a winning measure.
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