Plandemic: Oil/Gas Industry FAFO-ing on Trump Tariffs

Improbably, one of my newest favorite follows on YouTube is an Oil/Gas executive from Oklahoma, Matt Randolph, aka “Mr Global”.
He’s a little abrasive and combative, as an apparent democrat might have to be to survive in his environment, but his insights about the oil/gas industry are consistent with my wider reading, and often well put.
What he’s on about now is that the current economic chaos has not been all that great for much of the oil industry, as prices sink below break-even on recession fears.

The article below appeared in the New York Times a month before the tariff “liberation”.

New York Times:

President Trump’s promise during last year’s election to make it far easier to drill for oil and gas thrilled energy executives who believed his policies would lower their costs and help them make a lot more money.

Those hopes are now fading. Thanks to Mr. Trump’s tariffs, the oil and gas industry is contending with rising prices for essential materials like steel pipes used to line new wells.

That has not yet translated into a meaningful change in U.S. drilling activity or production expectations, but companies have begun revising budgets to reflect higher materials costs. Decisions made today about which wells to drill will affect production many months from now.

Oil refineries are separately bracing for a tariff on Canadian oil, which some of them need to produce gasoline, diesel and other fuels.

Houston Chronicle (paywall):

Sweeping tariffs implemented Wednesday may ultimately breathe new life into the U.S. steel industry, but prominent Texas economists warn it will come at a cost to the oil industry. 

“Why is it OK to save a U.S. domestic steel job, and at the same time, cost a U.S. domestic oil and gas job?” said Karr Ingham, president of the Texas Alliance of Energy Producers and a longtime petroleum economist. “Because that’s exactly what will happen.”

Complicating matters further, on Thursday OPEC made a surprise decision to put more oil on the market. Crude prices shed an eye-popping $11 between Wednesday and Friday morning, falling to $60.76 per barrel in Friday morning trading from $71.83 on Wednesday. 

CNBC:

U.S. oil prices fell about 2% on Monday, adding to last week’s steep losses on fears President Donald Trump’s global tariffswould push the U.S., and maybe the world, into a recession.

U.S .crude oil fell $1.29, or 2.08%, to close at $60.70 per barrel, while Brent lost $1.37, or 2.09%, to settle at $64.21. The latest price action comes after U.S. crude and Brent closed down more than 10% last week.

Futures tied to U.S. West Texas intermediate crude hit a session low of $58.95 per barrel, the lowest level since 2021. Global benchmark Brent fell to an intraday low of $62.51.

The decision by key OPEC+ producers last week to increase the pace of production hikes has also put downward pressure on oil prices. Saudi Aramco on Sunday slashed the price of its flagship Arab Light crude.

Trump touted the steep fall in oil prices early Monday.

“Oil prices are down, interest rates are down (the slow moving Fed should cut rates!), food prices are down, there is NO INFLATION, and the long time abused USA is bringing in Billions of Dollars a week from the abusing countries on Tariffs that are already in place,” the president said in a Truth Social post.

But worries are mounting that tariffs could lead to higher prices for businesses, which could lead to a slowdown in economic activity that would ultimately hurt demand for oil.

The tariffs, which are set to take effect this week, “would likely push the U.S. and possibly global economy into recession this year,” according to JPMorgan. The firm on Thursday raised its odds of a recession this year to 60% following the tariff rollout, up from 40%.

OilPrice.com:

This week saw oil prices tank more than 10% as President Donald Trump’s tariffs went into effect. A single-day drop of more than 7% in global oil prices is rare but not unheard of. It usually signals something dramatic: the spectre of war (directly involving the U.S.), pandemics, cartel infighting, or, in this case, the first new salvo in a brewing global trade war. 

We have been here before, and not that long ago. In fact, we have been here, exactly, during Trump’s first crack at the tariff arena. 

We count six incidents/events that led to single-day oil price crashes of >7% just since mid-2020.August 1, 2019 – Trump’s Tariff Threat (-7.9%)

WTI: -7.9% | Brent: -7.0%

President Trump had tweeted out a new 10% tariff on $300 billion of Chinese imports, cratering oil prices as the markets panicked over trade war escalation and a global demand slowdown. They would learn in his second term that they had seen nothing yet.March 9, 2020 – The Price War Meltdown (-24.6%)

WTI: -24.6% | Brent: -24.1% ($34.36)

This was the granddaddy of all plunges. After OPEC+ talks fell apart, Saudi Arabia and Russia launched an oil price war just as the COVID-19 pandemic was going global. Crude fell, hard. WTI crashed 24.6% in a single day, marking the second-largest one-day percentage drop in history.
April 20, 2020 – Below Zero (-305%)

WTI: From $18.27 to -$37.63 Brent: $25

Investopedia:

The impact of the COVID-19 pandemic hammered the oil industry in 2020, forcing U.S. oil prices to go negative for the first time on record. In a matter of hours on April 20, the May 2020 contract futures price for West Texas Intermediate (WTI) plummeted from $18 a barrel to around -$37 a barrel.1

Oil producers were faced with a glut of crude oil that left them scrambling to find space to store the oversupply. Brent crude oil prices also tumbled, closing at $9.12 a barrel on April 21, a far cry from the $70 a barrel that crude oil fetched at the beginning of the year.