Over at the Oil Drum, Gail Tverberg argues that Europe is getting hammered by soaring oil prices harder than just about anywhere else. Not good news for a continent already mired in recession. And the graph below is especially striking — the euro zone countries with the worst trade imbalances (and, not coincidentally, the worst debt crises) are also particularly dependent on foreign oil and gas:
Indeed, some experts have suggested that rising oil prices could have been an underappreciated contributor to the euro zone mess in the first place. In a paper for Nature, James Murray and David King detailed how steadily rising crude prices worsened Italy’s trade imbalances in the run-up to the country’s debt crisis: “Despite a decrease in imports of 388,000 barrels per day compared with 1999, Italy now spends about $55 billion a year on imported oil, up from $12 billion in 1999. That difference is close to the current annual trade deficit.”
Now, there are a few reasons why Europe is in worse shape on energy imports than the United States. For one, as Tverberg notes, Europe’s domestic oil production has been declining inexorably since 2002, making it more reliant on foreign oil. (As it happens, there’s a large shale formation in France, the Paris Basin, that could potentially contain a lot of unconventional oil, but French legislators have banned shale fracking for now.)
The United States, by contrast, has experienced a modest oil boom in North Dakota that has helped the country pare back its massive crude imports a bit. True, the 500,000 new barrels of oil per day from North Dakota’s shale plays haven’t been enough to fully offset America’s 9 million barrels of daily oil imports, but they can help at the margins.
Another key difference: The United States has enjoyed rock-bottom natural gas prices of late, thanks to a surge of hydraulic fracturing in the Marcellus Shale and elsewhere, which has helped offset the pain of pricey oil. Europe, for its part, doesn’t have cheap natural gas (although drillers are slowly starting to explore promising shale reserves in Eastern Europe). In theory, the Europeans could buy some cheaper gas from the United States, but exporting gas isn’t as easy as it sounds: U.S. producers are slowly building new export terminals that won’t be ready until 2015 at the earliest.
For now, then, Europe looks quite vulnerable to twists and turns in the global energy markets.