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Tsvetana Paraskova

Tsvetana Paraskova

Tsvetana is a writer for the U.S.-based Divergente LLC consulting firm with over a decade of experience writing for news outlets such as iNVEZZ and…

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Trump’s U.S.-Steel Pipeline Plan To Backfire On Energy Projects

oil barrels

The U.S. Department of Commerce is due to submit a plan to President Donald Trump regarding a presidential memorandum on the use of American-made steel and iron products in pipelines.

One of the first memorandums that President Trump signed after taking office was ordering the Secretary of Commerce to “develop a plan under which all new pipelines, as well as retrofitted, repaired, or expanded pipelines, inside the borders of the United States, including portions of pipelines, use materials and equipment produced in the United States, to the maximum extent possible and to the extent permitted by law.”

In April, President Trump ordered the Secretary of Commerce to report if “steel is being imported into the United States in such quantities or under such circumstances as to threaten to impair the national security.”

The Commerce Department is expected to release the report any day now, but over the past six months, the all-American steel pipeline project has raised doubts and criticism from energy companies, pipeline makers, and trade bodies, although many steel makers and steel manufacturing associations have expressed support for the plan.

The Steel Manufacturers Association (SMA)—whose members represent 75 percent of U.S. steelmaking capacity – strongly supports the intent of the American-steel-first policy, arguing that it would boost the economy, increase capital investments, and create American jobs.

“With capacity utilization rates hovering around 70 percent, the domestic steel industry has ample existing capacity to supply materials for pipeline projects,” SMA President Philip K. Bell says. “This plan is also a critical component in the achievement of U.S. energy self-sufficiency,” Bell notes.

However, the oil and gas industry—which had hailed President Trump’s approval of the Dakota Access and Keystone XL pipelines—begs to differ regarding possible protectionist policies on steel. Related: New Tanker Regulations May Impact Oil Prices

In a response to the National Security Investigation of Imports of Steel, oil and natural gas industry associations—including the American Petroleum Institute (API), the American Gas Association (AGA), and the Association of Oil Pipe Lines (AOPL)—said at the end of May:

“In fact, limitations on steel imports to the US may hinder the US energy revolution and may hurt US geopolitical standing abroad. The oil and natural gas industry involves complex operations that benefit from a strong and diverse supply chain. Broadly applied trade restrictions would significantly undermine that supply structure and potentially compromise our member companies’ oil and natural gas production, refining and transportation of energy to consumers, including the US military.”

Earlier in May, the associations published a report commissioned to ICF, which found that in recent years around 77 percent of the steel used in line pipe was imported. Due to the reliance of imported goods, lack of immediate substitutes, and the fact that some materials and equipments are not currently manufactured in the U.S. “an immediate implementation of stringent domestic content requirement for line pipe, fittings, and valves would mean that most oil and gas pipeline construction projects would be delayed or stalled,” according to the report. The report also warns that U.S. jobs would be lost, and that restrictions on imports would incur economic costs for delayed or cancelled pipeline projects. Related: Saudi Arabia Regains Influence Over Oil Markets

The U.S. Chamber of Commerce, for its part, says that “imposing broad tariffs or other barriers against steel imports would undermine the competitiveness of U.S. manufacturers, incentivize offshoring, and endanger more American jobs than it would protect.”

The Chamber is also warning that tariffs could invite retaliation against other U.S. exports.

The EU’s Trade Commissioner said in June that the European Union would retaliate if the Trump Administration were to impose import restrictions on steel and European steelmakers suffered from such a move.

Last week, the Commerce Department told CNBC that it declined “to comment on any issues or legal analysis until the report is issued.”

Although the American-steel-first plan has gained some support from domestic steelmakers, the oil and gas industry is pushing back against it, and this project is potentially pitching two of the industries that have been seen as benefiting the most from a Trump presidency against each other. So in this case, the ‘Buy American’ plan could backfire on the U.S. energy dominance agenda.

By Tsvetana Paraskova for Oilprice.com

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Leave a comment
  • Naomi on July 26 2017 said:
    Oil companies will buy US pipe because the steel industry elected President Trump.
  • Jason Estrada on August 04 2017 said:
    Did you READ the article? The U.S. doesn't produce enough steel to keep up with the demand therefore slowing the process. It would be great to use only domestic steel but will most likely have to be done in stages. The steel industry did not single handedly elect Trump. Furthermore, the oil companies will buy pipe from anyone they choose to. Regulating who they can purchase from is illegal.

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