There Is A Lot More Than Canadian Crude Oil Getting Slapped With the 10% Energy Tariff

All this talk of trade wars is one more thing for U.S. oil and gas producers to worry about. That’s because overseas exports are the only thing balancing natural gas and NGL markets, and increasingly crude oil also relies on exports to clear light-sweet volumes from U.S. shale plays. More than half of propane produced in the U.S. already moves out of the country via ship, with China, Japan and South Korea among the highest-volume destination markets. Only about 3 Bcf/d of natural gas has been exported as LNG over the past few months, but there was only one lower-48 LNG export terminal operating until last week. In a year there will be six terminals pumping out LNG to overseas markets. And so far this year, an average of 1.4 MMb/d of crude oil — one-seventh of U.S. production — has reached the waterborne export market, not including all the gasoline and distillate exports. As exports assume an ever-larger role in U.S. hydrocarbon markets, it is important to consider ramifications of possible constraints on exports, including the potential for trade retaliation in response to President Trump’s recently announced tariffs on steel and aluminum. Exports, one of the key topics we’ll consider at our upcoming School of Energy — Spring 2018, is the subject of today’s blog.

Tariffs have served as a cornerstone of President Trump’s economic vision. In the campaign, he said he could impose tariffs as high as 25% on all imported goods from Canada — including crude oil — and he could deliver on that promise at any time. This has raised concerns, especially for Canadian producers and U.S. refiners, who depend on the efficient and economical movement of barrels between the trading partners. In today’s RBN blog, we look at how much Canadian crude oil flows to the U.S., how those imports could be affected by tariffs, and how Canadian producers and U.S. refiners would share the financial impact.