US energy sector to suffer amid trade disputes

Many US oil and gas companies use Chinese casings and pipes "so the tariffs will increase the cost of the oil and gas companies in the United States," said Guan Linhua, CEO at Surge Energy America, a Texas-based production and exploration company.

In an escalation of the trade tensions, Washington on May 10 increased additional tariffs on 200 billion US dollars' worth of Chinese imports from 10 percent to 25 percent, and has threatened to raise tariffs on more Chinese imports. In response, China raised additional tariffs on a range of US imports, including liquefied natural gas (LNG) imports, on June 1.

According to Guan, the tariff hikes would lead to the cancellation of some multi-million-dollar LNG projects in the US states of Texas and Louisiana, putting US companies in a more difficult situation.

Vessel tracking figures showed that so far this year, only two LNG vessels have gone from the United States to China, compared with the 14 vessels in the first four months of 2018.

From February 2016 to July 2018, China was the third biggest import country for U.S. LNG. However, the Asian country has not ranked in the top 15 so far this year.
US energy companies will have to buy products from somewhere else if they cannot buy from China, while Chinese oil and gas equipment manufacturers and service providers need to find new buyers for their products, said Guan.
This will have a great impact on both sides in the long run, he added.
Meanwhile, the trade disputes would also have a spill-over effect on other U.S. industries such as transportation.

Texas will see volume drops at its ports, said Charles Knobloch, former chairman of Offshore Technology Conference, an annual event held in the city of Houston.

"There could be a drop in the volume of traffic that goes in and out of the port," said Knobloch, referring to the Greater Port of Houston which is the biggest port in the country because of foreign waterborne tonnage due to massive petrochemical manufacturing activities by nearly 200 private companies.

According to official data, the port has created 801.9 billion dollars in economic value and over 38.1 billion dollars in tax revenue, as well as 3.2 million job opportunities.

Guan and Knobloch worried that the trade disputes might also put downward pressure on crude oil prices as a slowdown in global economic growth would lead to less demand for oil.

Crude oil prices have plunged in the week ending on May 31, with the price of West Texas Intermediate for July delivery down 8.75 per cent and Brent crude oil for July delivery down 6.11 percent.

Both analysts called for the two countries to seek solutions through dialogue.