Posted on: 07. 17. 19
No matter what market you examine these days, the 2019 tariffs are a hot topic. From China to Mexico, the United States government is making international waves that are threatening to crash into recent developments in oil and gas.
Even though in recent years our market has thrived, if changes are imposed, many industry leaders believe that tariffs could lead to a domino effect that will quickly impede our economic progress.
Presidential Tariffs Against Mexico
U.S. relations with our neighboring nation of Mexico have been relatively strained as of late. With the push for stronger borders, everything deemed negotiable seems to be on the table.
In June of 2019, President Trump proposed 5% tariffs on all U.S. exports to Mexico unless the country reduces the influx of citizens attempting to cross our borders illegally.
Geopolitics is no stranger to our industry, but experts who were once confident with international tariffs now say that this particular move could be a painful blow for our industry.
What Imposing on Mexico Means for the Oil & Gas Industry
According to an article from Forbes, if our nation continues down this path, the United States will quickly hand over our position in oil and gas to OPEC and Russia, Experts say this threat is very real because if Mexico decides to retaliate against Trump’s sanctions, oil and gas prices will drastically shift.
Currently, the U.S. imports 650,000 barrels of crude oil a day that stems from Mexico. Government data states that this alone is around 10 percent of our total crude imports.
Mexican oil is considered to be heavy and a necessity to help create diesel fuel and standard gasoline. If the Mexican government opts to fight back against Trump’s tariffs, then we could be seeing retaliating tariffs in the 25 percentiles, which would cripple our competitive advantage at an international level. This is why the race between Biden and Trump, can have lasting effects on the oil & gas industry.
Earlier Tariffs Create a Gray Future
After seeing the impacts of tariff threats in China, it’s no shock that imposing tariffs on a neighboring ally creates the fear of substantial economic tremors. However, it may only be a short-term problem.
Initially, threats against China spooked investors and the industry saw a record drop in market data. Throughout the next few weeks, our infrastructure has shown that the U.S. is still a leading producer in crude oil at 2 million barrels per day. Will tariffs on Mexico have a negative impact on our power? Only time will tell.
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