Last week President Trump said the EU should close its trade surplus with the US by buying $350BN of US energy. The Administration’s spontaneous policy switches on tariffs have been unpleasant for investors. But at least for those exposed to the energy sector, there’s a gratifying consistency in that oil and gas are invariably part of the solution.

It won’t be easy for the EU to satisfy this demand. Their total imports of oil, gas and coal last year were $420BN, and this is the place where decarbonization at any price drives energy policy. The EU’s green desire to cut hydrocarbon consumption conflicts with increased LNG imports and is unlikely to draw much sympathy from the White House.

Moreover, EU policy is often disjointed. Imports of Russian LNG reached a new record last year. They have a non-binding goal of eliminating Russian supplies by 2027 although some German politicians would like the opposite.

Meanwhile, German Chancellor Friedrich Merz said he would be willing to transfer German Taurus long-range missiles to the Ukrainian Defense Forces. Perhaps imports of Russian LNG generate the electricity that is used to manufacture the missiles?

Coherence is an accusation rarely hurled at EU policy.

Meanwhile, the buildout of US LNG export infrastructure continues to attract capital.

Energy Transfer announced an agreement under which MidOcean Energy will finance 30% of the development of its Lake Charles LNG export terminal.

NextDecade (NEXT) agreed a 1.2 Million Tonnes per Annum (MTPA) 20 year deal with Saudi Aramco, to be supplied from Train 4, part of Stage 2 of their Rio Grande LNG terminal in Brownsville, TX. On Monday TotalEnergies exercised an option to take 1.5 MTPA over 20 years. With these two deals in hand, NEXT expects to move ahead to a final investment decision on Train 4 and begin construction.

NEXT is a highly volatile stock that is risky by the standards of midstream energy with its reliable cashflows.

From a recent, pre-tariff intra-day high of $9.71 on March 25^th NEXT slumped and briefly touched $5.16 on April 7 as markets absorbed the enormity of Liberation Day. A 47% two week decline is only tolerable for those holders willing to overlook the market’s occasional bipolar disorder – which is to say, unlevered long-term holders.

As regular readers know, we count ourselves in that group and believe the upside is commensurate with the risk.

I was in London and Belgium for the past two weeks. I had the opportunity to attend a presentation from a venture capital firm seeking financing for Ukraine’s growing armaments industry, most importantly drones.

I have no military background, but it’s inescapable that UAVs, UGVs and UMVs (respectively, Unmanned Aerial, Ground and Marine Vehicles) have changed the battlefield. The flagship of Russia’s Black Sea fleet was sunk by a UMV last year.

I learned that Ukraine produced 2.5 million drones last year compared with Germany’s 1,000.

The US has underwritten Germany’s defense for decades, enabling their ruinously expensive energiewende (energy transition). The need to boost defense spending and counter the Trump tariffs will force some overdue realism on Germany’s political leaders.

Wherever I travel I’m always looking for contrasts in how different regions use energy. Our hotel room in Belgium had a slot for your room key, without which the lights wouldn’t work. It stops guests going out and leaving the TV on. Dark corridors light up as you enter, triggered by motion sensors that ensure they’re only lit when needed.

This is because on average Belgians pay twice what the US does for electricity. The shale revolution has kept prices down here, and renewables have pushed them up in the EU, especially in Belgium.

London’s congestion charge on vehicles entering the city center has reduced traffic and emissions. It’s also ensured that most of the cars you see in the west end are either black taxis or expensive toys (Ferraris, Bentleys, Porsches etc), the latter often driven by Arabs presumably spending some of their oil wealth.

To be in Europe means being ready to defend US policies. My friends raised the issue of tariffs – gently, because our long friendships will outlive many more presidencies. But this is mostly how foreigners are experiencing the new Administration.

Republican presidents rarely play well in western Europe, because our political middle ground is to the right of theirs. Uncontrolled illegal immigration, fiscal profligacy that fueled the 2022 inflation spike and a centrist that, once elected, veered left set the stage for November’s result.

Few outside the US appreciate this, as my gentle reminders explained. But I also allowed that the tariffs have revealed no presidential advisors willing or able to explain basic trade economics in the Oval Office.

I like Trump’s energy policies. But tariffs as implemented are capricious and may lead us into a recession.

In the vein of aligning with government policy, investing in hydrocarbon infrastructure and especially LNG export terminals is, in our opinion, one of the best ways to achieve acceptable returns through the current uncertainty.

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