United States Natural Gas Will Never Weaken Russia's Position

Russia's nationalized Gazprom is accusing Ukraine of faltering on payments for previously delivered natural gas, increasing the threat of a supply disruption to the troubled country and the European Union. Events  this week sparked plenty of commentary on the United States using its vast natural gas resources as a diplomatic weapon to soften Russia's hand.

While the United States is currently sitting on an ocean of inexpensive natural gas, exporting the fuel will not weaken Russia's resource control over Europe for three reasons. First, the U.S. government could cut all the red tape in exporting LNG, but commercial interests are not going to ship to Europe when much healthier margins are made by exporting to Asia. Even if prices skyrocketed in Europe, LNG regasification and natural gas storage is severely inadequacy. Finally, Russian natural gas is produced from conventional wells, making it the cost leader, effectively giving Russia command over market share and holding the winning hand. 

Another shot for America
Imagine a company that rents a very specific and valuable piece of machinery for $41,000 per hour. (That's almost as much as the average American makes in a year!) And Warren Buffett is so confident in this company's can't-live-without-it business model, he just loaded up on 8.8 million shares. An exclusive, brand-new Motley Fool report reveals the company we're calling OPEC's Worst Nightmare. Just click here to uncover the name of this industry-leading stock, and join Buffett in his quest for a veritable landslide of profits!

This segment is from Friday's edition of "Digging for Value," in which sector analysts Joel South and Taylor Muckerman discuss energy and materials news with host Alison Southwick. The twice-weekly show can be viewed on Tuesdays and Thursdays. It can also be found on Twitter, along with our extended coverage of the energy and materials sectors @TMFEnergy..


Read/Post Comments (1) | Recommend This Article (0)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On March 09, 2014, at 7:41 PM, jaymooney wrote:

    I take issue with points 2 & 3

    Point 2 - US exports will go to the highest bidder - in turn driving down prices in Asia - this will cause some diversion to Europe based on shipping cost differentials. ( after all - all NG would go to Asia the highest price market if not for shipping differentials)

    Point 3 - Yes Russia is a low cost producer - currently charging top dollar for NG - an increase in completion would force a competitive price response.

Add your comment.

DocumentId: 2868863, ~/Articles/ArticleHandler.aspx, 7/30/2014 10:23:39 PM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...


Advertisement