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The U.S. Energy Industry Can’t Afford A Trade War

The U.S. Energy Industry Can’t Afford A Trade War

oil roughnecks

As the U.S.-China trade spat turns into a full-blown war with tariffs and retaliatory tariffs and threats of further tariffs, U.S. energy exports to China may suffer if Beijing follows through with its threat to slap tariffs on U.S. oil and oil product imports.

China has, in recent years, become a key export market for growing U.S. energy exports. In fact, China is America’s second-largest crude oil customer after Canada and is also one of the biggest importers of U.S. propane and liquefied natural gas (LNG).

Associations of U.S. manufacturers, retailers, and petroleum and chemicals producers have stepped up calls on the U.S. Administration to seek alternative solutions to the tariffs, warning that additional levies would hurt U.S. jobs and growth.

If the United States were to impose tariffs on oil, U.S. oil sellers would have to look for other destinations and attract new customers, which could cost them more.

Last year, more U.S. crude oil was sent to China than any other destination except Canada, the EIA said in an analysis on Tuesday. China received more U.S. crude oil in 2017 than the third- and fourth-largest importers combined, the United Kingdom and the Netherlands.

U.S. crude oil exports to China averaged 330,000 bpd between January and April this year, with February sales to China beating even exports to Canada, according to the EIA.

And it’s not just crude oil. China was also the third-largest destination for U.S. propane exports last year, behind only Japan and Mexico. Around half of U.S. propane exports went to Asia in 2017, displacing supplies from Middle Eastern countries and some regional production of propane.

For LNG, 15 percent of U.S. exports went to China, making it the third-largest importer of U.S. LNG behind Mexico and South Korea.

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