President Donald Trump ramped up threats to use tariffs to protect the US energy industry from a historic glut of oil, as efforts to forge a global deal to cut output appeared to lose momentum.
Trump said on Saturday at a White House press briefing he’d use tariffs if needed to protect the domestic oil industry, even as he predicted that Saudi Arabia and Russia would come to an agreement to cut output and stem the rout in prices.
But such a deal looked a bit further from reach at the weekend after a diplomatic row between Saudi Arabia and Russia. A gathering of Opec+ members and other producers scheduled for Monday was pushed back, to give more time for negotiations.
Saudi Arabia, which launched a price war last month with Russia after Opec+ talks broke down, has made clear that it won’t cut production unless other producers – including the US – also hold back supply. But Trump said on Saturday: “I don’t care about Opec.”
The prospect of a deal to reduce the massive glut of oil caused by the coronavirus lockdown sent benchmark oil futures to a record gain last week. Oil prices have fallen about 50% this year as the pandemic has knocked out as much as a third of global oil demand. That means producers are going to have to reduce output eventually – with or without a deal – as storage both on land and at sea fills up.
In the latest manoeuvre in the price war, Saudi Arabia postponed yesterday its monthly price-setting event for exported oil. The Opec meeting has been tentatively rescheduled for Thursday.
On the idea of slapping tariffs on foreign oil, the US oil industry is split. Some independent shale producers – who’ve been hardest hit by the recent market slump – are in support, while refiners and large integrated companies are typically opposed.
The American Petroleum Institute, which helped arrange a meeting with the president on Friday, argues tariffs would inject uncertainty into an already rattled global marketplace.
“If I have to do tariffs on oil coming from outside, or if I have to do something to protect thousands and tens of thousands of energy workers, and our great companies that produce all these jobs, I’ll do whatever I have to do,” Trump said on Saturday. Low oil prices are “going to hurt a lot of jobs,” he said.
That was a change in tone from Friday, when he suggested he wasn’t inclined to target Russia or Saudi Arabia with oil tariffs.
Hundreds of thousands of US oil industry jobs are hanging in the balance, with about $15bn of investments wiped out from the budgets of shale explorers and many of them on the brink of bankruptcy.
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