America First vs. Energy Dominance

`America First` vs. `energy dominance.`

Those two signature initiatives of President Trump are going to war with each other. as his protectionist policies and expected intervention in competitive markets are putting up barriers to the oil and natural gas industry.

It’s a perilous time in U.S. policy as the natural gas industry convenes in Washington next week for the World Gas Conference. the first time the U.S. is hosting the triennial event since the Reagan administration.

 “You can rightly ask how an administration focused on energy dominance can be pursuing policies that interfere with energy dominance. and the answer is energy dominance is not the only goal of the administration.“ said Kevin Book. managing director for research at ClearView Energy.

Many of Trump`s policies under his `energy dominance` agenda are helping the oil and gas industry.His administration is pursuing an aggressive deregulatory agenda. beginning the long process of rolling back environmental regulations and not imposing new rules. It is easing permitting for energy infrastructure projects. such as natural gas pipelines. to transport the shale revolution to the rest of the country. It is pushing for more liquefied natural gas terminals to export around the world.

“On the whole. especially compared to previous administrations. President Trump has been very good for oil and gas.“ said Tom Pyle. president of the free-market American Energy Alliance and Trump`s former Energy Department transition chief. “Are there issues and challenges? Absolutely. But net-net. these guys shouldn`t have anything to complain about.“

But the Trump administration is imposing barriers on its effort to dominate world markets with U.S.-produced natural gas and crude oil.

Tariffs on imported steel are raising costs for pipeline producers that can’t obtain the unique grade of steel they need domestically. The leader of a natural gas pipeline industry group. the Interstate Natural Gas Association of America. warned this week that Trump`s 25 percent steel tariffs could threaten billions of dollars of investment in gas and oil pipelines in the U.S. and Canada over the next two decades.

Trump’s $50 billion tariffs on a variety of Chinese imports was met with a counterattack on U.S. energy from Beijing. China has said it will slap penalties on U.S. crude oil. though it will spare liquefied natural gas. because Beijing needs the cleaner-burning fuel source to weed itselfoff coal and reduce smog. China is the largest customer of U.S. crude. importing about 363.000 barrels a day in the six months ending in March.

“A trade war is not good for the U.S. oil and gas sector.“ said Jason Bordoff. the founding director of the Center on Global Energy Policy at Columbia University and a former White House energy adviser to President Barack Obama. “If China imposes tariffs. you have to discount that crude and find another home for it. That would not be good for U.S. producers.“

The Trump administration is also spooking natural gas businesses. and most everyone else in the energy industry. by promising to bail out coal and nuclear power plants as the legacy power sources struggle to compete with cheaper natural gas and renewables.

The interference in the market would punish natural gas. which. thanks to the boom in hydraulic shale fracturing. has replaced coal as the fuel used most by U.S. power plants.

And the Trump administration is wading into the global oil market. succeeding in helping to convince OPEC Friday to end two years of production cuts to ease rising gasoline prices. While higher prices hurt consumers at the pump. they help U.S. producers.

“With the U.S. now the world’s largest natural gas producer. rising exporter. and one of the leading oil producers. seeking lower oil and gas prices may not necessarily be in the U.S. favor. however these lower prices would constrain a rival such as Russia.“ said Agnia Grigas. an energy and political risk expert who is a senior fellow at the Atlantic Council.

Pyle acknowledges thetariff fightis a “legitimate hit“ to U.S. oil and gas.

But trade conflicts end. he said. and other potential challenges. such as subsidies for coal and nuclear are. for now. hypothetical. Trump’s gifts to oil and gas. he says. are more lasting. including the “certainty“ he has provided with limited regulations. the tax breaks he has granted them. and his ambition to drill in places long off limits. such as more offshore waters and the Arctic National Wildlife Refuge in Alaska.

“The potential harms are speculation.“ Pyle said. “Whereas regulatory reforms. tax reform. these are on the table. bona fide. solid things that industry is benefiting from. I don`t see it as being a situation where industry is worse off.“

Book. however. said the contradictions in U.S. oil and gas policy are hard to ignore.

“There is a sad irony in the intrinsic conflicts between a trade war and energy dominance.“ Book said. “The dominance agenda is pretty clear on what it is. You produce more. you move it to coasts. and develop overseas markets for it. You cannot expect the positive market outcomes of the last five years will be easy to replicate in a world of new barriers.“

 

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