Trump Trade War - Tariffs stand in way of next US shale revolution - Report
Fox Business reported that according to a recent report from the International Energy Agency, US, already the world's top crude oil producer, could surpass Saudi Arabia to become the top crude exporter as President Trump’s tax and regulatory policies have put America on the path to global energy dominance and laid the foundation for second wave of America's shale revolution. Last year, the administration started taxing foreign steel to protect US steel mills from competition. These tariffs may have delivered some marginal benefits to domestic steel companies, but they've raised costs on firms in nearly every other industry, especially the oil and gas sector. Keeping these tariffs in place, or replacing them with a quota system as some have suggested would impede energy production and weaken the economy. President Trump can cement his legacy and make America the world's most dominant oil exporter by scrapping the steel tariffs.
The 25% tariff on steel has raised the cost of pumping all this oil. Over the last year, the price of steel tubes used to line wells in the Permian Basin, a gargantuan oil field in west Texas and New Mexico, spiked over 30%. Tariffs have also raised the cost of transporting this oil from wellheads to refineries and shipping terminals. Companies depend on a sprawling, and ever-expanding, network of pipelines to transport this fuel. Almost 80% of steel used in oil pipelines is imported.
Pipeline companies often don't have the option of buying American, since US steel mills don't make some of the specialty parts required for oil pipelines. Consider a 500 mile pipeline project in the Permian Basin, which is currently facing a pipeline shortage. For this particular project, pipeline company Plains All American needs specialty steel that only a Greek mill can provide. Plains petitioned the government for a steel tariff exemption, but was denied last year. Though the project is moving forward, the company's CEO said that the tariffs have raised the project's price tag by around USD 40 million.
Unfortunately, Plains' pipeline isn't the only project in jeopardy. As long as steel tariffs are in place, the average pipeline will cost an additional USD 76 million to build, according to global consulting firm ICF. These higher costs may discourage companies from constructing new pipelines, thereby impeding energy firms' ability to transport oil to market.
America's energy renaissance has revitalized the economy. Oil and gas firms support over 10 million American jobs and add over USD 1 trillion to GDP. The industry is on track to create nearly 2 million new jobs by 2035. However, that job growth hinges on smart policies from our leaders. President Trump has done wonders for the economy with his tax cuts and light regulatory touch. But to unleash the full potential of the energy industry, he'll need to scrap steel tariffs.
Source : Fox Business