Trump's Impact on European Energy Prices: Rising Gas and Oil Costs?
The European Union (EU) has announced a new plan to expedite the cessation of all Russian oil and gas supplies, aiming to increase economic pressure on Russia and reduce funding for the ongoing war against Ukraine.
Despite a significant decrease, Russia still supplied 13 million tons of crude oil to the European market in 2021. However, the EU Commission President, Ursula von der Leyen, has proposed a faster exit from these supplies.
According to an analysis by a Brussels agency, remaining gas supplies could run out without risking supply security, as there are enough alternative gas suppliers on the global market. This suggests that the switch away from Russian energy is possible without causing significant disruptions.
The EU plans to fully end imports of Russian fossil fuels by the end of 2027. A new sanction package aims to accelerate the phase-out of Russian liquefied natural gas (LNG) imports to January 1, 2027, a year earlier than previously planned.
The member states and the European Parliament are currently negotiating the proposal submitted by the Brussels authority in June. Approval of 15 of the 27 EU countries, which together represent at least 65 percent of the total EU population, is required at the national level for the rules to come into force.
Before the start of the Russian invasion of Ukraine, the energy supply in Germany and many other EU countries was largely secured with cheap oil and gas from Russia. However, the EU has imposed far-reaching import bans on Russian energy carriers such as coal and oil, but there are still exceptions and gas sanctions have not yet been imposed due to dependencies.
The gas industry has stated that the EU's goal of ending imports of Russian gas by the end of 2027 is achievable, but warns of potential price increases and market instability without clear replacement strategies. The industry urges the EU to develop a comprehensive plan to ensure a smooth transition and maintain energy security.
The plan is justified by the fact that Russia's war economy is financed by revenues from the sale of oil and gas, and an accelerated exit is intended to increase economic pressure on Moscow and make it more difficult to finance the war against Ukraine.
It is worth noting that the von der Leyen plan may not deter Trump's initiative to impose new sanctions against Russia, as it could still be stopped by the Council of Member States and Trump has additional demands unrelated to the EU plan. However, Ukraine criticizes that Europeans continue to pay billions for Russian energy supplies, thereby also funding the Russian war chest.
Trump may be seeking to improve sales opportunities for US liquefied natural gas in Europe, but the ultimate goal of the EU remains to end its reliance on Russian energy sources. The EU's plan, if approved, would see the complete import ban on oil by the end of 2027 and the import of Russian gas phased out and completely ended by 2028.
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