EU Commits $7.5 Trillion to U.S. Energy Purchases by 2028, Despite Feasibility Concerns

The United States and the European Union have reached a significant energy agreement, with the EU committing to purchase 7500 billion dollars worth of American energy products by 2028 and investing 6000 billion dollars in the U.S. In exchange, the U.S. has agreed to impose a 15% tariff on EU goods, excluding steel and aluminum. However, analysts have raised concerns about the feasibility of this agreement, citing market and political constraints that could hinder its implementation.

The primary concern is the EU's ability to enforce large-scale energy purchases among its member states and private enterprises. The EU lacks the authority to mandate these purchases, which could lead to delays or even the collapse of the agreement. This uncertainty has led some to question whether the deal is more of a political gesture than a concrete commitment. The EU Commission has stated that enterprises have expressed interest in investing at least this amount in the U.S. by 2029, but this does not constitute a binding obligation.

Analysts have warned that the market and political factors make the large-scale energy procurement unrealistic. One analyst noted that the EU cannot force its member states or enterprises to buy American energy, just as the U.S. government cannot compel producers to sell to Europe. Another expert pointed out that the EU itself does not purchase energy; rather, it is the member states or companies within those states that do so.

The White House has expressed hope that the EU will fulfill its commitments under the agreement. A White House official stated that the EU has agreed to these purchases and that the U.S. president has the authority to adjust tariff rates if either party defaults. The EU Commission President has indicated that the energy purchases will be phased in at 2500 billion dollars per year, covering the remainder of the U.S. president's term. The specific details of these purchases are still being finalized and are expected to be completed in the coming weeks.

However, achieving the annual target of 2500 billion dollars in energy purchases from the U.S. poses significant challenges. According to data, the EU's current annual energy imports from the U.S. are around 800 billion dollars. To meet the agreement's target, the EU would need to double its energy imports from the U.S., which is seen as highly unrealistic given current market conditions and production capacities.

Increasing U.S. oil exports to the EU is particularly challenging due to stagnant production levels and potential declines in the coming months. U.S. companies would need to reallocate exports destined for Asia and Latin America to the EU, which is not feasible given the current market dynamics. Additionally, increasing oil imports does not align with the EU's climate goals, and Europe's refining capacity is declining.

Similarly, increasing liquefied natural gas (LNG) exports to the EU is also fraught with difficulties. U.S. terminals are already operating at full capacity, leaving no additional capacity for increased exports to the EU. LNG, like oil, would need to be diverted from other customers to meet the EU's needs, which is not a viable solution. While new LNG production capacity is expected to come online in the next two years, it is unlikely to fully meet the EU's requirements, given that the EU currently imports more than half of its LNG from the U.S.

Despite the challenges, some analysts see the agreement as a positive step towards expanding energy trade between the U.S. and the EU. The EU's commitment to phasing out Russian energy imports by 2028 creates a significant supply gap that the U.S. is well-positioned to fill. This alignment of interests makes the agreement mutually beneficial, although the practical implementation remains uncertain.