Big Oil sung the Trump administration’s praises when the U.S. president slashed corporate taxes at the end of last year. Now, with trade wars looming, senior oil executives aren’t quite so supportive.
Steel tariffs and a reduction in free trade are a major risk to oil and gas demand and economic growth, the chief executive officers of Exxon Mobil Corp. and Chevron Corp. said at the World Gas Conference in Washington D.C. Tuesday. Their comments followed by a day remarks from Total SA CEO Patrick Pouyanne who worried the trade stance could curtail U.S. natural gas exports.
“The risk of trade skirmishes or trade wars starts to weigh on people’s perceptions of economic growth in the future,” Chevron CEO Mike Wirth said in a panel discussion with Exxon chief Darren Woods. “From a demand standpoint I think that’s a risk.”
The U.S. oil industry, including Exxon and Chevron, were supportive of Trump’s tax-reform at the end of last year, saying it would boost growth in on-shore shale production as well as in building midstream and downstream infrastructure such as pipelines and chemical plants, mainly along the Gulf coast. But the administration’s tough-talk on steel and free trade have damped their enthusiasm for Trump’s agenda.
“Early on with tax reform, the deregulation you’ve seen in the US, those have enhanced the projects were looking to do for our company,” Exxon’s Woods said. They “are steel-intensive projects. When tariffs come on and with threats of a trade war, you risk making those projects less competitive and less attractive.”
Steel, heavily used by the oil industry, has been a flashpoint between the Trump administration and China, with levies and counter-levies contributing to mounting concerns of a full-blown trade war between the world’s two largest economies.
“We certainly try to buy steel in the U.S.,” Wirth said. But “not everything we need here is made here. Certain alloys and sizes of pipe are not made by the U.S. steel manufacturers. We have to procure those elsewhere. It runs the risk of being a drag rather than a huge negative.”
Trump has also been critical of the North American Free Trade Agreement, which he says benefits Canada and Mexico to the cost of U.S. companies and workers. Woods made a point of defending the agreement.
“We import raw materials from Canada and Mexico,” he said. “We convert those to high value fuel projects and high value chemical products. We export those around the world and back into the US and Canada. Those are high value U.S. jobs. It benefits our country, benefits Mexico and Canada.”
On Monday, Total’s Pouyanne, who is building liquefied natural gas terminals in Louisiana and sees the industry’s shale-led growth as key to improving the U.S. trade balance, said the industry needs good relations with China, the fastest-growing consumer of LNG. He expects the fossil fuel to become one of America’s major exports over the coming years.
“It would be detrimental to U.S. LNG if suddenly we have a trade war in some countries like China,” he told reporters. “Balancing the export deficit with U.S. and China, LNG plus oil is part of the equation.”