President Donald Trump’s ongoing tariff strategy against various global trade partners is poised to significantly impact the U.S. oil and gas industry in the coming year. According to a report from Deloitte, quoted by Reuters, these tariffs could lead to project delays valued at approximately $50 billion due to disruptions in international supply chains.
The oil and gas sector heavily relies on imports for essential materials and components, such as steel and piping. Deloitte’s analysis reveals that tariffs could inflate costs by as much as 40% for some products. Industry leaders have expressed concern over rising expenses, as highlighted in the quarterly Dallas Fed Energy Survey, where executives reported that increased costs are already dampening activity in the oil sector. Although not all cost increases can be directly attributed to tariffs, many executives acknowledged that higher prices for imported components are affecting their overall financial health.
Impact on Investment Decisions
Deloitte emphasizes that the tariffs may delay final investment decisions and the commencement of offshore projects. This shift is critical, especially considering that nearly 40% of the demand for oil country tubular goods in 2024 is expected to be fulfilled through foreign sources. As a result, oil and gas companies may need to prioritize strengthening the resilience of their supply chains rather than focusing solely on cost control.
Earlier this year, energy firms experienced a decline in stock prices following President Trump’s announcement of tariffs on all trading partners. The situation was exacerbated by a downturn in oil prices, further straining the industry. According to Rystad Energy, the breakeven price for most U.S. oil producers is around $62 per barrel, while West Texas Intermediate (WTI) is currently trading at approximately $60 per barrel.
As the oil and gas industry navigates these challenging waters, the long-term implications of tariffs on project timelines and costs remain a significant concern. The focus on enhancing supply chain resilience could redefine the strategic approaches of companies operating in this sector, potentially reshaping the landscape of U.S. energy production in the near future.
