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One of the more unexpected effects of President Trump’s trade war with Beijing is that it might lead to rising prices for oil. not because tariffs are making oil imports more expensive but because they could make it more difficult to drill for oil in the U.S.
The latest batch of Chinese goods. amounting to $300 billion in imports. that the White House wants to slap 25% tariffs on includes a mineral called barite. The energy industry argues barite is crucial to its ability to drill safely and effectively. China has the world’s largest and best quality supplies of barite.
“Barium sulfate is a key additive used in drilling. and drilling is the biggest market for the mineral.“ Dan Eberhart. CEO of Canary. a company that provides drilling equipment and services. told the Washington Examiner. “Barite deposits aren’t rare. but they are in high demand. and drillers have grown dependent on cheap barite supplies from China and India. with China having the largest share of the market.“
The White House has held off on imposing the tariffs pending future talks with China but remains poised to impose them should those talks break down.
The American Petroleum Institute. the main industry trade group. and several companies. such as Halliburton. pleaded with the administration to exempt barite from tariffs during public hearings held at the International Trade Commission in Washington. D.C.. in June.
“Barite is indispensable for safe energy production. and there is no alternate supply to Chinese barite sufficient to meet American demand.“ testified David Henrick. president of Newpark Drilling Fluids. “A tariff on barite could slow America’s record-breaking oil boom and increase costs for U.S. producers and consumers.“
The situation illustrates just how dangerous tariffs can be in a global economy. says Simon Lester. trade policy analyst with the free market Cato Institute. “This is another example of how actions to take on China end up hitting specific U.S. producers. There’s always going to be a trade-off. and there’s always going to be somebody hurt and somebody helped by tariffs.“ Lester told the Washington Examiner.
The mineral is a dense but soft material used to create “drilling mud.“ an industry term for fluid used in conjunction with drills. Barite is blended with other chemicals to make the fluid. which is then pumped down into the well. It lubricates the drill. helps maintain the stability of the well. and also clears rocks shattered by the drills and brings them to the surface. It is used in both domestic and offshore drilling.
“Barite is ideal for this application because it is nontoxic. chemically and physically unreactive. nonmetallic. and has low abrasiveness.“ Ryan Ezell. vice president for Halliburton. an oil field service company. told the Trump administration panel. The inertness makes it environmentally safe to use. “As a result. barite is by far the best option for U.S. oil and gas industry from technical and cost standpoints.“
There are only three active barite mining operations in the U.S.. all in Nevada. Combined. they produce about 500.000 metric tons of the mineral. That’s only enough to cover about one-sixth of the industry’s needs. American energy producers import 2.5 million tons a year. mostly from China.
Ramping up domestic production wouldn’t help. Barite mining reached peak production in 1980. and reserves have steadily dwindled over the last four decades. Only 450 people are employed domestically mining it.
“It`s not a matter of time. it`s just not possible to source domestically the volumes of barite at the quality specifications that our industry requires.“ Aaron Padilla. the American Petroleum Institute’s senior adviser on international policy. told the federal panel.
Barite can be obtained from other countries. however. “China is the largest producer. but India. Morocco. Kazakhstan. and Iran also supply barite. so I suspect the issue is one of price and supply relationships. There are substitutes. but issues of contaminants may cause problems.“ Frank Verrastro. senior vice president for energy policy at the Center for Strategic and International Studies. told the Washington Examiner.
The energy industry notes that trade in the mineral has nothing to do with China’s policies of forced technology transfers. which is the administration’s stated reason for the tariffs. The administration appeared to agree on this point. Barite had been included in prior proposed lists for tariffs. only to be dropped.
It came back for the most recent one because the administration is trying to put maximum pressure on Beijing by covering all remaining imports. U.S. Trade Representative Robert Lighthizer told the House Ways and Means Committee last month that the $300 billion batch of tariffs “includes all of the rest of the trade between the U.S. and China. That was the president`s direction. and that is what we are looking at.“
U.S. trade representative spokesman Jeffrey Emerson told the Washington Examiner that the administration will carefully review the public comments and exclusions requests. “Based on this review. the U.S. trade representative may determine revisions to the proposed list.“ he said.
