US President Donald Trump’s current trade policies appear to be having a negative effect on energy companies based in the country as Trump steps up his efforts against high oil prices.
Evidence appears to be gathering to suggest that these trade tensions are adversely impacting oil transporters and producers in the US. This could have the knock-on effect of allowing current trade rival China to source cheaper oil from elsewhere.
Steel tariffs implemented over the last year are having one of the largest effects on energy project construction, and some big names are already starting to feel the pinch.
Plains All American Pipeline LP found its application for exclusion from these tariffs rejected by the US Department of Commerce. The steel was to come from Greece to deliver a $1.1bn US shale gas pipeline running from the West Texas Permian Basin.
Although the company appealed the decision based on its purchase of 550 miles of steel before the new measures, the Department of Commerce filed its rejection on the basis of available steel for purchase within the US.
Having labeled the decision-making process both “unjust” and “flawed”, Plains All American Pipeline is only the first in a line of many energy companies awaiting a ruling, including Kinder Morgan. Those that have already received mixed results from the process include Royal Dutch Shell plc and Chevron Corp., though figures from the Department of Commerce suggested that 267 exclusion requests received approval this week, while 452 companies found themselves denied.
Trump intended the large 25% tariff placed on imported foreign steel to offer an injection of support and stability for US steel-producing companies as they, along with energy producers, face ongoing and increasing competition from abroad.
In the wake of current oil prices, which have risen 52% since Trump’s election, the President has called upon US oil companies to ramp up production and has even opened up federal drilling waters to reverse the current trend of price increases and reduce the cost of fuel at the pump for the average consumer.
The change in pace of the oil market has been quite significant since the end of 2016, with the price of a barrel currently sitting at $68.08 compared to $44.83 just over 18 months ago.
Trade wars are continuing to show no signs of abating, with tariffs levied on over $34bn worth of Chinese goods for export. Further tariffs may affect an additional $200bn worth of these goods as Trump rails against what he calls “unfair trade practices”.
In another move that appears to be helping China more than US energy companies, the decision in May to levy tough economic sanctions on Iran aimed to take up to 2.2 million barrels per day of Iranian crude off the market by November.
However, China is already looking to stockpile ahead of the November deadline, when all countries – with the exception of reliant allies – must not import Iranian crude oil, as it is the largest buyer of Iranian oil at present.
To assuage this upcoming shortfall in oil production, Trump has been seeking word from Saudi Arabia that it will alter its own production strategy.