On April 21, the first Europe-bound shipment of U.S. liquefied natural gas (LNG) left the Gulf of Mexico and crossed the Atlantic, a move that has been widely regarded as the first step in an impending gas war between the United States and Russia. As the theory goes, Russia has a grip on the European gas market, which it uses to bully its close neighbors and shush any major European states that push back on its geopolitical ambitions. U.S. LNG, it follows, will break Russia’s stranglehold. It is a cheaper and more reliable alternative. In turn, Russia will either lose market share or compete by lowering its prices. But either way, Europe wins, economically and geopolitically.
The economic argument is simplistic but not incorrect, although the geopolitical argument is dead wrong. It overstates the importance of U.S. LNG to Eurasian politics, and it reinforces the false impression that Europe’s energy security lies abroad. New supplies, from the United States or elsewhere, are good for consumers since they will further depress prices. But Europe’s energy security is in European hands alone; obsessing too much about what U.S. LNG can do risks distracting from the challenges, including strengthening Europe’s internal energy market, which remains woefully fragmented, especially in Eastern Europe.
By 2020, the United States could be sending roughly 80 billion cubic meters of LNG to Europe a year—about two-thirds of the volume that Russia exported to Europe in 2015 and just under a third of Europe’s entire gas consumption, which is 400 billion cubic meters per year (450 billion cubic meters, if one includes Turkey). It is no wonder that conflict seems imminent: if such a large share of U.S. LNG were to land in Europe, Russia would get pushed out of the market and lose a large chunk of the $42 billion it earned by exporting pipeline gas in 2015.
Yet that argument rests on faulty assumptions about the gas market. Trying to understand the European
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