Personnel Changes in President Trump’s Cabinet
With the exit of Secretary of State Rex Tillerson and the CIA Director Mike Pompeo’s move over to the State Department, the State Department’s focus can be expected to shift to the challenges posed by North Korea and those countries that are known to support the “Hermit Kingdom” – China and Iran.
As the President reengineers his policy team to those he believes are most capable of tackling the North Korea challenge, the economic issues, such as trade and tariffs, might continue to be used as bargaining chips in this ongoing, high-stakes geopolitical chess match.
The President and his Administration, however, can be expected to keep energy independence as one of the central features of both his economic and foreign policy plan. The tariff issues, though, complicate Administration’s drive towards meeting that goal.
The Big Trade War on Steel and Aluminum Tariffs
The President signing off on tariffs of 25% on steel and 10% on aluminum on all our trading partners, except Canada, Mexico and Australia, is of serious concern to the energy industry. The transshipped steel and aluminum exports that move through Canada and Mexico are not “out of the woods” completely. Those imports are now under review as the NAFTA agreement is being renegotiated.
Whether it is steel for towers for wind projects, pipelines, or drilling rigs, companies are examining how a 25% increase on their cost of imported steel products, already in the pipeline, will impact their bottom line. Companies who have been actively lobbying since the Section 232 investigation was announced in the spring of last year, were surprised by the breadth of the tariffs imposed and are now scrambling to put together exemption applications. The Executive Committee of American Petroleum Institute, in an unusual step, met with the President and key officials at the White House this past week to express the impact of changes in NAFTA and the new steel and aluminum tariffs would have on energy jobs and infrastructure.
At the end of the day, the tariffs could be limited to Chinese steel and aluminum exports, whether they are shipped directly or transshipped through other countries. Also, countries where the U.S. has a significant trade deficit might be “under the microscope” too.
Shale oil production continues to rise unabated
Once the world’s largest importer of crude, the U.S. is closing in on Russia to switch roles and become the world’s largest producer. As Bloomberg reported, 2017 was a big, money-making year for the oil and gas industry, especially in the realm of oil and gas exploration, which was helped by the climb in oil prices. With U.S. shale oil output forecasted by the EIA to hit nearly 7 million barrels a day next month, aggressive American producers are threatening the oil rally started by the production limits that OPEC recently initiated.
The situation is definitely fluid. Stay tuned!