Should President Trump Take Immediate Executive Action on Russian, Saudi & OPEC Oil Imports?
Yes. This is a “Just Do It” moment for President Trump.
Source: Reuters
On March 17th I co-authored and article with Daniel Turner for Real Clear Energy calling for President Trump to immediately impose punitive tariffs on Russian, Saudi and OPEC oil imports to the US.
To date, no action has been taken by the President, and as of this morning, funding for the Department of Energy’s feeble attempt to support US oil producers by purchasing crude into the Strategic Petroleum Reserve was successfully stripped out of the final stimulus legislation by Democrats.
So, what’s the plan now?
There are rumors that a bill may be introduced in the next few days that would ban oil imports. It’s unclear if this proposed ban is for all oil imports, including Canada and Mexico, or just Russia, Saudi and OPEC. Regardless of what countries are included in this proposed bill’s import ban, I’m willing to bet – and Lord knows that I’m not a betting man – that it has a less-than-zero chance of being passed through congress.
Now that the massive $2 trillion “stimulus package” appears to be headed for passage, I will say, I’m shocked, but maybe not surprised, that Congressional representative from energy-producing states (Texas, Alaska, North Dakota, Oklahoma, Colorado, Wyoming, Louisiana, Pennsylvania and Ohio) aren’t immediately pressing the President to impose tariffs. The massive list of benefits to the Country from executive action imposing tariffs on Russia, Saudi and OPEC are easy:
- Immediacy – no congressional approval needed
- No material cost to US Treasury
- 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 Federal, State and local taxes
- 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 producers 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
To combat the knee-jerk critique of “but America loves sub-$2.00 gas prices”, I bounced this tariff thesis off Bjornar Tonhaugen, Head of Oil Markets at global energy research and business intelligence firm Rystad Energy on a quick conference call. At a high level, he generally agreed that US restrictions on imported crude oil – whether through tariff or ban – would help to more quickly support crude oil prices for US E&P and would not affect the low US domestic prices of natural gas for heat, electricity or industry.
It’s hard to say were US benchmark crude prices would settle if the President takes this action, but I’m willing to bet – and again, Lord knows that I’m not a betting man – that WTI would quickly settle in between $50-$60/ bbl.
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
