A raft of executive orders signed by President Donald Trump on day 1 of his second term make it easier to extract oil and gas in the United States. Trump also took the US out of the Paris Climate Agreement, which aims to limit the use of fossil fuels. Three weeks previously, on January 1, Russian gas exports to the European Union (EU) by a pipeline through Ukraine was stopped.
What is the upshot of these developments for the global energy market?
First, fossil fuels are set to have a longer runway and get more investment. Second, global gas markets, in which Europe is the primary consumer, will move away from Russia, the world’s No. 2 producer of natural gas, further towards the US, the number 1 producer.
Impact on EU, Russia, US
EU: Since the start of the Russia-Ukraine war in February 2022, the EU has cut back on its reliance on Russian gas – imports fell 80% from 132 billion cubic metres (bcm) in 2021 to 26 bcm in 2023.
The share of Russia’s pipeline gas in EU gas imports fell from more than 40% in 2021 to about 8% in 2023, according to EU figures.
The reduction of the dependence on Russian gas was made possible because the EU bought more liquefied natural gas (LNG) from Norway and the US – which pushed up LNG prices to 2-3 times their normal levels – and cut overall consumption of gas by 20% by reducing energy consumption.
The cost has been a loss of competitiveness and an economic slowdown in Europe. The German economy, the largest in the EU, declined by 0.2% in 2023 and did not grow at all in 2024. The IMF has projected zero growth for Germany in 2025, too – even as advanced economies overall are set to grow at 1.8%.
Russia: Russia has lost access to its largest export market. In 2021, more than 60% of the EU’s $193 billion imports from Russia comprised energy imports. This fell to $55 billion in 2023, and is projected to fall further.
US: Until a decade ago, the US was a net importer of gas. This changed in 2016, as the shale gas boom, which began in the early 2000s, expanded. In 2023, the US exported 114 bcm of LNG, which made it the world’s top exporter of the product.
In 2023, the US supplied 56.2 bcm LNG to the EU, comprising 19.4% of European LNG imports (behind Norway, 30.3%). As President-elect, Trump threatened “tariffs all the way” if the EU did not “make up their tremendous [trade] deficit with the United States by the large scale purchase of our oil and gas”. He has now announced policies to raise both production and exports of American oil and gas.
Natural gas and LNG
When cooled to minus 162 degrees Celsius, natural gas becomes a liquid that can be transported by special ships. Non-liquid natural gas, in comparison, has been traditionally transported by pipelines, which are costly and often tie particular sellers and buyers together.
Liquefaction facilitates trade of gas, and makes the gas market more global, flexible, and accessible. So, while the security situation in Afghanistan and Pakistan makes a pipeline to India from West Asia unfeasible, India imports large quantities of the supercooled fuel gas.
The demand created as a result of Russia being locked out of the European market will keep LNG prices high. The top LNG players in the world are the US, Australia, and Qatar. High gas prices have now brought back into play American oil and gas companies, many of which had filed for bankruptcy in 2020 when energy prices crashed.
Natural gas in the form of LNG is Australia’s second largest export, and higher gas prices have helped Australia record strong GDP growth in 2022 and 2023.
LNG is Qatar’s only export, and this wealth has enabled the tiny emirate to play an outsized geopolitical role.
Asia, Africa impact
China, Japan and South Korea, the three largest importers of LNG globally, are better placed to deal with high energy prices than countries of the Global South.
India is a large and growing importer, but increased costs will slow the planned adoption of the cleaner fuel to wean itself off coal, which comprises 50% of the country’s energy mix.
Countries like Pakistan and Bangladesh, which rely heavily on imported gas, will be severely hurt. The economic problems in these countries are partly due to the commodity price shock of 2022, when gas prices went up manifold.
Natural gas is also the raw material for the manufacture of urea, crucial for the farm sector. The higher gas prices have translated into higher fertiliser and, therefore, higher food prices. The gas price spike of 2022 hurt food importers in Asia to Africa, especially Egypt and Nigeria.
Currently, global gas prices, while elevated, are not at the extreme levels seen during the 2022 crisis. Many countries have since adjusted their energy procurement strategies, built reserves, and implemented subsidies or price controls to cushion the impact. The shock this time will be milder.
Impact on Russia and Iran
Russia and Iran have the world’s largest and second largest natural gas reserves respectively. However, these two countries are effectively blocked from the global LNG market for the foreseeable future.
The companies that are capable of setting up LNG export terminals are unwilling to do business with Iran and Russia because US sanctions on both countries make normal commercial relations all but impossible. BNP Paribas in 2014 and HSBC in 2012 agreed to pay fines of $8.9 billion and $1.26 billion respectively to the US Department of Justice for violating the federal International Emergency Economic Powers Act of 1977 and the Trading with the Enemy Act of 1917.
Amit Bhandari is Senior Fellow for Energy, Investment and Connectivity at Gateway House: Indian Council on Global Relations
LNG is transported in special tankers. (Wikimedia Commons) 
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