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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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Steel Tariffs Raise Costs For Texas Oil Producers

Shale rig

The imposition of steel import tariffs and quotas will directly burden Texas oil and gas producers with higher costs for oilfield steel goods, which could result in job losses, reduced activity, and smaller companies struggling to absorb additional costs, the Texas Alliance of Energy Producers (TAEP) said in comments on the U.S. tariffs on steel.

“Clearly the tariffs themselves will lead to cost increases for oilfield steel, Oil Country Tubular Goods (OCTG) and line pipe (LP) in particular. Beyond that, shortages of oilfield steel products will develop – and are already developing – further driving up costs to oil and gas producers. A sizable number of products are simply not available domestically, OCTG in particular, and costs have already risen significantly and will likely continue to do so,” said John Tintera, President of the TAEP. The oil and gas trade association represents 2,600 members—primarily smaller independent companies—involved in oil and gas exploration and production, oilfield services, and drilling for crude oil and natural gas.

In the comments to the U.S. Department of Commerce, the Texas alliance asked for exemptions for the following countries supplying oilfield steel goods—Canada, Mexico, the European Union, South Korea, Argentina, Brazil, and Japan. China did not make the list.

U.S. President Donald Trump has granted temporary exemption from tariffs on steel from the EU and several other important security allies of the U.S. until June 1, and trade talks are ongoing between the EU and the United States. Related: Can Angola Overcome Its Oil Production Decline?

In its comments on the steel tariffs, the Texas alliance opposed import quotas, saying that “the imposition of quotas will very likely raise the cost of oilfield steel products to American domestic producers to a much greater extent than tariffs.”

“Depending on location, intra-company economics, and other factors, steel typically accounts for 10-20% of the overall oilfield cost structure. As such, the imposition of tariffs and the potential imposition of quotas by agreement or fiat and the resulting steel cost increases is of great concern to TAEP, our member companies, and Texas and US domestic oil and gas producers,” the alliance said.

By Tsvetana Paraskova for Oilprice.com

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