Who is real culprit behind astronomical gas prices? Forbes magazine points it's finger to Europe

It is not American gas exporters that are to blame for the explosion of gas prices but the intermediary market players, whose headquarters are mainly based in Europe.

The financial publication Forbes commented on the ongoing fuel prices crisis and attempted to identify who is to blame and benefits from the current situation, heavily shifting the focus of the discussion to the European side. 

Prices of natural gas in Europe have skyrocketed to levels scarcely seen before 2021 with European governments concerned about the future, especially those soon up for re-elections like France.

Forbes stated that the race for finding a culprit, beyond Russia, has begun, seeing as someone is experiencing a windfall in profits for natural gas as the price of the fuel in Europe is many times higher than prices in countries exporting gas to Europe in the form of liquified natural gas (LNG).

European representatives, such as German economy minister Robert Habeck, have begun to criticize the US and other "friendly" LNG supplier countries, for profiting from those "astronomical prices", while French President Emmanuel Macron accused the US of a "double standard" of keeping domestic prices for gas 3-4 times cheaper than that of the exported LNG to Europe.

The financial publication argued, that US LNG exporters’ contracts are structured differently in terms of pricing and flexibility from those of virtually every other LNG supplier globally which is why it is not them that reap the biggest benefits from the crisis.

US LNG is priced on the basis of Henry Hub (HH), a pipeline interconnection point near the US Gulf Coast that serves as the major market exchange point for both physical and futures contracts in the US. US HH prices have increased significantly over the last year or so but pale in comparison to the prices in the European hub.

US LNG contracts are supposedly generally either service contracts — where the US company never owns title to the LNG — or sales contracts delivered based on the "free-on-board" (FOB) principle. In both cases, US LNG exporters cease to have any custody or ownership over their product when LNG is transferred onto an LNG tanker at the US plant’s loading dock. From then on, it is up to the buyer where and for what price the LNG is sold.

According to Forbes, Europe is currently one of the major markets for this gas but it is not the US LNG exporters or US gas producers who benefit from the steep price difference between HH and European spot prices but the "middlemen" companies who buy natural gas or LNG in the US and sell it in Europe.

Many of these companies are European, and almost none are American, the publication argued, stating that traders are another party who profit from buying LNG produced in the US and selling it in Europe.
These companies buy LNG cargoes in the secondary market with most of the LNG trading done by companies based in Switzerland, sometimes with London trading desks.

Regardless of who benefits, President Macron and Minister Habeck are right that Europeans are now paying "astronomical" prices for natural gas that are several times higher than US HH prices. But that did not have to be the case.

In their conclusion, Forces stated that European countries pay high prices for wholesale natural gas not because of companies’ greed but because the gas market propped on Russian gas supply collapsed and there was no readily available alternative to replace it. They believe LNG from the US can be available at prices much cheaper than current European hub prices but requires additional facilities that will take 3-4 years to build.

The only available current alternative, according to Forbes, is the buying in the spot market, which thanks to the drop in supply from Russia, means paying high retail prices.