• 4 minutes Trump will meet with executives in the energy industry to discuss the impact of COVID-19
  • 8 minutes Charts of COVID-19 Fatality Rate by Age and Sex
  • 11 minutes Why Trump Is Right to Re-Open the Economy
  • 13 minutes Its going to be an oil bloodbath
  • 21 mins Ten days ago Trump sent New York Hydroxychloroquine. Being administered to infected. Covid deaths dropped last few days. Fewer on ventilators. Hydroxychloroquine "Cause and Effect" ?
  • 2 hours US Shale Resilience: Oil Industry Experts Say Shale Will Rise Again
  • 7 hours Mr
  • 16 hours While China was covering up Covid-19 it went on an international buying spree for ventilators and masks. From Jan 7th until the end of February China bought 2.2 Billion masks !
  • 4 hours Free market or Freeloading off the work of others?
  • 4 hours China Takes Axe To Alternative Energy Funding, Slashing Subsidies For Solar And Wind
  • 6 hours Marine based energy generation
  • 18 hours What If ‘We’d Adopted A More Conventional Response To This Epidemic?’
  • 19 hours How to Create a Pandemic
  • 20 hours Apple to Bypass Internet and Beam Directly to Phones
  • 11 hours Which producers will shut in first?
  • 18 hours Real Death Toll In CCP Virus May Be 12X Official Toll
Nick Cunningham

Nick Cunningham

Nick Cunningham is an independent journalist, covering oil and gas, energy and environmental policy, and international politics. He is based in Portland, Oregon. 

More Info

Premium Content

What Trump’s Tariffs Mean For Global Oil And Gas

President Trump is about to escalate the brewing global trade war with another round of tariffs, although he appears to be narrowing his sights on just China.

The Trump administration announced a suite of tariffs that could affect $60 billion worth of Chinese products, a move intended to step up pressure on what the administration argues is China’s efforts at intellectual property theft. The Washington Post reported that after President Trump’s aides brought him a package of $30 billion worth of tariffs on China, he told them to double the figure.

The move will likely spark retaliation, and it would come shortly after the administration imposed steel and aluminum tariffs, which affect much more of the world than just China.

In the U.S., the steel tariffs have been vociferously opposed by the oil and gas industry. Pipelines, platforms, drilling rigs, processing facilities – the entire oil supply chain relies on steel. Oil and gas pipelines import about three-quarters of the steel used to build projects in the U.S.

A few days ago, the Commerce Department published details on a process that certain industries could use to apply for exemptions; the agency said that exemptions would be granted to companies that could not find enough steel supply in the U.S., which would presumably apply to oil and gas.

The American Petroleum Institute said they “expect the department will acknowledge various market realities and take into consideration the complex supply chains of the U.S. oil and natural gas industry and the need for specialty steel not available domestically for many of its projects.” And since the API just met with White House officials last week, it seems reasonable to assume that the Trump administration will grant them what they want.

Still, industry trade groups are concerned that the exemptions will be on a per-product basis, rather than a waiver applied to the whole sector. Haggling on a per-product basis, oil and gas companies say, would create uncertainty and red tape.

Moreover, with the next round of tariffs on the way, this time aimed at China, the trade war is not going away. Even if the U.S. oil and gas industry can avoid the worst with the steel tariffs, the measures targeting China could also result in blowback. Related: Scientists Are One Step Closer To Nuclear Fusion

For instance, the new tariffs on Chinese goods could derail the investment case for new LNG projects because they typically require long-term commitments from buyers, often at fixed prices. That provides the financial certainty for developers as they head into what is typically a multi-year, multibillion-dollar project. Without commitments, LNG developers tend not to greenlight new LNG terminals.

China is expected to be the largest source of demand growth going forward for LNG, and China is one of the main reasons why LNG markets have tightened quite a bit more than expected over the past year. China is gobbling up as many LNG cargoes as it can in order to help fuel its aggressive coal-to-gas switch. Because of the horrific air quality issues in many Chinese cities, the government has been trying to shut down older coal-fired power plants and also move many Chinese households off of coal for heating. The campaign has been so successful that China ran into some gas shortages this winter.

China’s gas consumption jumped by nearly 15 percent last year, and its LNG imports surged by 50 percent, wildly exceeding expectations.

That makes China the obvious destination for a lot of new LNG cargoes. But American tariffs could complicate the picture for LNG exporters on the U.S. Gulf Coast. "Contracts with Chinese buyers may be off the table for the next wave of projects," said Katie Bays, an energy investment analyst at Height Capital Markets, according to the Houston Chronicle.

While there are around a dozen massive LNG projects proposed for the Gulf Coast, the Houston Chronicle notes, very few have been given the greenlight. A trade war with China could close the door on a lot of them.

More broadly, such a trade war could act as a drag on the global economy. China could retaliate with tariffs on U.S. soy or aircrafts, according to the Washington Post. If the spat affects economic growth, it will put downward pressure on oil prices.

Meanwhile, even as a trade conflict with China appears likely at this point, there is still uncertainty over the U.S. approach to the rest of the world. The Trump administration originally wanted to severely limit any exemptions from the steel tariffs, fearing that doing so would render them ineffective, but the outcry has been loud and many countries have been clamoring for exemptions.

The EU had been threatening retaliatory measures against U.S. products if it had not been granted an exemption. The Trump administration seemed to bow to the pressure, granting a long list of exemptions to the EU, Argentina, Australia, Brazil and South Korea, while Canada and Mexico had previously been granted exemptions, pending NAFTA renegotiations. Related: Is Guyana Prepared For An Oil Boom?

Taken together, the Trump administration has both narrowed its trade war to focus mostly on China, rather than much of the world, while also significantly raising the stakes.

Oil prices had rallied this week on geopolitical concerns related to Iran and Venezuela, combined with a surprise crude inventory stock draw in the U.S. Yet prices fell back on Thursday as Trump stepped up U.S. economic confrontation with China. The Dow Jones Industrial Average fell 3 percent; oil prices were off more than 1 percent and energy stocks also posted strong declines.

The financial markets are clearly betting that Trump’s trade war is bad news for global economic growth, which in turn will drag down oil prices.

By Nick Cunningham of Oilprice.com

More Top Reads From Oilprice.com:


Download The Free Oilprice App Today

Back to homepage






Leave a comment
  • Don Lapre on March 23 2018 said:
    Nick ! Where is that $40 oil in 2018 you promised us ?????

Leave a comment




Oilprice - The No. 1 Source for Oil & Energy News