In March 2018, President Trump placed a 25 percent tariff on imported steel. What is the likely impact of this steel tariff on OCTG and the oil and gas (O&G) industry? Discover more below with MSI Pipe Protection Technologies.
Understanding Steel Tariffs
To reduce the United States trade deficit, the Trump administration last year introduced a series of tariffs on imports. Overall, they were for various foreign goods and materials. Among the tariffs imposed were those on foreign steel, which is essential to the domestic oil and gas industry.
The U.S. government faces concerns from various domestic industries, as well as the threat of retaliatory tariffs from affected nations. However, they have offered steel tariff exemptions for certain countries. Almost immediate exemptions were granted to Argentina, Australia, Brazil, and South Korea. And fortunately, in May 2019, further exemptions were granted to Canada and Mexico. Yet, tariffs remain on some of the biggest steel exporting countries, including China, Japan, and India.
Impact on OCTG Investments
In recent years, domestic gas and oil production have increased dramatically, reviving America’s oil and gas industry, creating tens of thousands of new jobs, and lowering energy prices for consumers. The administration’s tariffs and quotas on foreign steel threaten to stall that growth.
The domestic O&G industry relies on the availability of imported steel for pipeline and well construction, surface management, and other essential operations. Steel imports account for close to half the steel currently used in the OCTG marketplace. Unfortunately, oil and gas producers cannot quickly or easily replace foreign steel products with products manufactured in the United States.
The potential impact of the ongoing steel tariffs on U.S. oil and natural gas production is significant and driven by both higher prices and lower availability for raw steel and steel products.
Keeping a Watchful Eye
Higher steel prices are likely to drive up the cost of OCTG products. Furthermore, they could dramatically increase the cost of pipelines and drilling projects. This could also lead to the delay or abandonment of some projects. Which, in turn, could further hobble the oil and gas industry and cost thousands of domestic jobs. It is also likely that consequences will pass higher material costs onto American families and businesses. And what could that look like? A possible 5-10 percent increase in energy prices.
Fortunately, we could avert these downsides if the administration revokes the tariffs or exempts additional steel-producing countries. However, if the administration decides to rescind the tariffs in the near future, the long-term impact may be negligible.
Rely on MSI Pipe Protection Technologies for All Your OCTG Needs
MSI Pipe Protection Technologies offers a variety of drill pipe protection products to help maintain the integrity of your OCTG and oilfield equipment. Not only do we care about protecting your investments, but we also care about the things that can affect your productivity and ROI. This is why here at MSI, we enjoy keeping our valued customers abreast of the latest industry-related news and events.
For quotes and product information, call to speak with one of our experts toll-free at 877-276-9208. As always, we’re here to help you deliver protected pipe, all day, every day.