As of Friday, August 24, 2018
It’s hard to create shovel-ready jobs if you can’t get shovels.
Whatever the long-term intentions of the Trump administration’s steel and aluminum tariffs, that’s the immediate challenge facing countless U.S. industries -- including the oil and natural gas sector.
It’s an unexpected roadblock for an industry that is otherwise thriving and boosting households and small businesses right along with us.
The United States leads the world in natural gas and oil production and refining -- producing at record levels just as world oil demand has reached record highs. Keeping up with that demand supports 10.3 million U.S. jobs throughout a multi-industry supply chain while providing affordable energy that has given American manufacturing a major competitive advantage.
Whether we consume U.S. energy here or sell it abroad, every barrel we produce adds stability to the global oil supply. Domestic oil prices have remained lower than international ones, even with recent price fluctuations.
In contrast to the Trump administration’s welcome tax and regulatory reforms, which provided a shot in the arm to U.S. businesses, imposing tariffs on materials from our closest allies is more a kick in the teeth – restricting access to vital supplies and weakening U.S. competitiveness in global markets.
Like so many other essential industries, the U.S. natural gas and oil industry relies on steel supplied by allies. We use it to drill wells that produce energy, build pipelines that transport it and operate refineries that convert it to a variety of valuable products.
Imposing a 25 percent tariff on steel from top economic partners like Canada, Mexico and the European Union promises to wreak havoc on the industry’s complex supply chain.
Consider one aspect of our operations: pipelines. The private sector is poised to invest over $1 trillion in energy infrastructure, including pipelines, to keep pace with surging production. That level of investment would support more than 1 million jobs each year on average through 2035 --including tens of thousands of good-paying construction sector jobs.
The uncertainty created by new tariffs and quotas could put that on hold. Without access to line pipe that the United States is incapable of producing, new pipelines needed to move crude oil from producing basins to markets in the U.S. and overseas are at risk.
Just ask Plains All American Pipeline LP. To build an upcoming pipeline, the company requires pipe milled to meet precise technical specifications – specifications that U.S. manufacturers currently can’t produce. Plains requested an exemption from the tariffs back in April for steel it ordered months before the tariffs were announced. But the Commerce Department denied the request.
Practically speaking, it’s not a matter of paying a bit more to buy American; it’s a matter of imports from our allies, or nothing.
Beyond restricting the availability of specific supplies, White House policy threatens trade relationships that are critical to U.S. economic success. Canada and Mexico are among our best energy customers, purchasing more than 650 million barrels of crude oil and refined products in 2016.
Disrupting trade with these continental neighbors not only jeopardizes tens of thousands of U.S. jobs but undermines an integrated North American energy market that significantly enhances our energy security.
Whether action comes from Congress or the White House, it’s clear that we need to change course. Addressing trade imbalances and unfair practices are important priorities. But these tariffs are the wrong tool.
Kyle Isakower is the vice president for regulatory and economic policy at the American Petroleum Institute.