How The U.S. Can Break Putin’s Energy Monopoly

By
A A A

natural gas production The U.S. hasn't decided to sell natural gas to Ukraine just yet … but decision time is getting closer.

Surging natural gas production means the U.S. can easily afford to ramp up exports of the commodity . And countries like Ukraine, which are currently at the mercy of Russian energy exports, could stand to benefit.

Consider the situation in Eastern Europe, where it would be an understatement to state that Russia's actions in Ukraine are tied to its oil interests. Ukraine's position is incredibly weak. The country gets 70% of its natural gas from Russia. It is also a veritable export hub, given that more than a dozen other European countries receive natural gas that flows through Ukraine.


With natural gas production surging in the U.S., the country is in a position to increase exports, if it so chooses. Ukraine isn't the only European country that could benefit. And it's certainly not the only one interested in seeing the U.S. break Russia's energy monopoly.

A full 30% of Europe's energy comes directly from Russia. That stranglehold means European leaders seeking relief are increasingly turning their eyes west.

It's no wonder why. This year, the U.S. is likely to surpass Russia as the world's biggest natural gas producer. And next year, in 2015, the U.S. is likely to dethrone Saudi Arabia as the world's number one oil producer.

The U.S. is growing natural gas production at such a rampant rate - by 44% between 2011 and 2040 -that even the U.S. Energy Information Administration predicts the country will be a net exporter of natural gas by 2020, if not sooner.

But for the U.S. to loosen Russia's grip on Europe it will need to do more than simply turn on the natural gas export spigot. It will need to rewrite laws. At the moment, U.S. natural gas exports are constrained by a law that limits trade to countries that aren't free-trade partners.

There are currently 20 countries with which the U.S. has free trade agreements , and Ukraine isn't on the list. In fact, very few European countries are. Most are in Central and South America, and the Asia-Pacific region.

There is, however, one loophole that allows a shipment to a country that isn't a free-trade partner. If the U.S. Energy Department ascertains that shipping the gas is in U.S. national interest, it can make an exception.

But according to the Wall Street Journal , the Energy Department has only approved six such natural gas export applications over the past few years. And right now, the U.S. needs to be absolutely sure it sends the right message to the world if it takes steps to allow natural gas exports to Ukraine.

That potential has some members from both the Republican and Democratic parties applying pressure to President Obama to get out his pen. And if the situation intensifies in Eastern Europe, that pressure will build.

We don't know how this will work out but one thing is clear: the U.S. is in a rare position of strength with respect to its energy production and export potential. It has the potential to break Putin's energy monopoly in Europe. And that means Washington needs to think decades into the future, not just weeks.

Because where the U.S. comes down on this issue, at this time, will set the stage for who its greatest allies in Europe will be in the coming years. And that has important implications for energy investors around the world.

Shocking photos of the "American Prius"

A powerful, new car is rolling off the assembly line in Kentucky - an American car, more efficient than the Toyota Prius. But it's not a wimpy hybrid. It's a 302hp heavy-duty beast. And since it runs on natural gas, it only costs around $15 bucks to fill up! And you can travel 750 miles on one tank. That's why we call it the "American Prius." And ONLY ONE COMPANY has the breakthrough technology for building this truck. And It's locked up the blueprints with 326 patents and is reaping all the profits! Click here to get a full report on this truck and the company building it.



The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing , Basics

Referenced Stocks:

Wyatt Investment Research

Wyatt Investment Research

More from Wyatt Investment Research:

Related Videos

Stocks

Referenced

Most Active by Volume

95,530,319
  • $15.15 ▼ 1.81%
88,891,852
  • $6.01 ▼ 6.09%
80,331,117
  • $117.16 ▼ 1.46%
75,474,903
  • $40.40 ▼ 3.83%
58,037,145
  • $3.54 ▲ 18.39%
53,961,231
  • $32.92 ▼ 0.12%
51,698,455
  • $23.89 ▼ 0.79%
41,667,475
  • $3.55 ▼ 1.11%
As of 1/30/2015, 04:15 PM


Find a Credit Card

Select a credit card product by:
Select an offer:
Search
Data Provided by BankRate.com