The employment impact of President Trumps inaction on immediately placing punitive tariffs on Russian, Saudi and OPEC oil imports has already hit the US oil and gas industry. Granted, these “Price War” employment impacts are a continuation of layoff, first associated with massive market-responsive 2020 capex budget cuts, then additional layoffs related to the energy demand destruction from the Coronavirus shutdown unleashed on the world by China.
Granted, these “Price War” employment impacts are a continuation of layoff, first associated with massive market-responsive 2020 capex budget cuts, then additional layoffs related to the energy demand destruction from the Coronavirus shutdown unleashed on the world by China.
However, the mounting Price War unemployment claims really, really sting. Because they could have been mitigated – maybe softened – by the President. And, it may cost the President critical votes in November as younger voters see the despair on their unemployed parent’s face; and spouses feel the desperation of their partners spirit and hold the President accountable for his inaction.
Remember, many of these voters plugged their nose – plugged it hard – and voted for Trump. Not because of his charm and grace, but because of his America First agenda. To most of us, America First would have translated into immediate oil import tariffs.
This was Trump’s moment to demonstrate international strength, national self-sufficiency and proverbially punch a couple of historically bad state actors, who both really hate America, square in the nose. These are leaders of counties that appear to only embrace the doctrine of the Strong Horse.
Oh well, we’ll see what happens when Russia, Saudi and OPEC meet this Thursday, April 9th, but I don’t expect any actionable agreement between the parties. I suspect they’ll walk away with an “agreement in principal”. Translation: we all agree we want larger market share, higher prices, and the US shale industry out of business. And, any agreement will probably have condition that include US oil production cuts and maybe the lifting of Russian sanctions (Side Note: the US industry has already cut production, and is cutting more, due to market forces; and it’s arguable that forced production cuts or quotas in the US would be illegal). Or, they may agree to “modest production cuts” (Another Side Note: Strong Horse strategy – announce production cuts in order to head-fake the President and Exxon Globalist Mike Pompeo – I mean Secretary of State – but in reality, a whole lot of cheating equals no production cuts at all).
The list of benefits for America from executive action that impose tariffs on Russia, Saudi and OPEC oil imports are easy:
- Immediacy – no congressional approval needed for tariffs.
- No material cost to US Treasury – and the national debt is already out of control.
- Enhanced national security – and how we have come to realize with Coronavirus that we need to control our resources and means of production.
- Preserving jobs that pay much-needed Federal, State and local taxes – refer to note above: and the national debt is already out of control.
- Produces Federal revenue for production on Federal lands.
- Punitive to Russia; Saudi Arabia and OPEC – first time ever the USA has been able to fight back against OPEC.
- Create a sustainable and stable domestic crude price for US E&P produces to survive and restructure into.
- Enhance broader stability in US capital markets – both equity and debt markets.
- Domestic oil prices would not spike and US consumers will still enjoy low pump prices and natural gas prices will not be materially affected, so consumers and US manufacturing and industry will still benefit from low prices for heat and power.
- Continued oversupply of crude by Russia, Saudi and OPEC will provide lower energy prices for Europe to enhance Coronavirus economic recovery.
What a shame. President Trump had the perfect opportunity to put America First a month ago when this Price War started. Another failure to act decisively this Thursday will be a “huuuge” loss for the President.
About the Author – Dan Genovese is a Director at the energy consulting firm EnerCom, Inc. with experience in corporate strategy, investor relations, ESG, government relations and policy. Mr. Genovese has worked in capital markets and has experience in upstream production and downstream energy demand. Contact: dgenovese@enercominc.com
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