They are relieved a deal was reached.
THE LIGHTBULB
An oil refinery stands in the background of a basketball court in Port Arthur, Tex. (AP Photo/David Goldman)
Oil and natural gas executives are breathing a sigh of relief after the United States and Mexico reached a deal to avoid tariffs threatening to constrict a burgeoning flow of crude oil and refined fuels between the two countries.
But the agreement is hardly going to be the end of trade tensions. Trump has shown he is willing to disrupt relations with Mexico and China, two of the largest U. S. trading partners, to a degree that sends shivers through the spines of fellow Republicans on Capitol Hill, as well as many of corporate executives who normally cheer the administration for easing regulations on businesses.
And Trump’s unpredictable behavior could still affect ratification by Congress of a renegotiated North American free-trade deal known as USMCA.
Frustrated by the flow of migrants at the southern border, Trump in a series of tweets late last month threatened tariffs on all Mexican imports, which would have started at 5 percent and could have risen to 25 percent.
That tweet sent representatives for refineries along the Gulf of Mexico into a lobbying overdrive.
“I feel like I’ve aged 20 years since last Thursday,” said Joshua Zive, a counselor at the law and lobbying firm Bracewell, which representatives refiners and other energy companies.
Their ask: that the heavy crude oil making its way to Gulf refineries receive an exemption under the threatened tariffs. Mexico is the third largest supplier of crude oil to the United States behind Canada and Saudi Arabia, exporting 665,000 barrels per day on average in 2018, according to the U. S. Energy Information Administration.
Refinery representatives pressed their case, according to their offices, in a flurry of phone calls to officials in the White House and at various other offices, including the departments of Commerce, Energy, State and Treasury, and the Office of the U. S. Trade Representative — anyone who would listen.
It turned out they could stand down, for now. On Friday, the leaders of the two nations announced a deal in which the Mexican government will seek to curb migration at the southern border in exchange for averting the tariffs.
The tariffs would have arrived at a particularly bad time for Gulf refining companies using Mexican crude, which include Valero, Chevron, Shell and Premcor, with the market for heavy crude tight in recent months because of political turmoil in Venezuela and renewed sanctions on Iran, sapping oil from international supplies. The market would have also been squeezed right before the peak of the summer driving season.
Retaliatory measures from Mexico could have cut even deeper, because energy is one of the few economic sectors in which the United States has a trade surplus with Mexico — a fact oil lobbyists tried to emphasize with the Trump administration.
“Right now on the trade side, we’re winning,” said Chet Thompson, chief executive of the American Fuel and Petrochemical Manufacturers, a trade association representing U. S. refineries and petrochemical manufacturers. “It’s a substantial surplus.”
What Mexico could have targeted was the $30.5 billion in gasoline, jet fuel and other petroleum products the United States sold to Mexico last year, compared with the $15.8 billion of mainly crude oil and natural gas Mexico traded north.
“Where could Mexico cause the most pain if they wanted to? Ag, and oil and gas,” said Christopher Guith, acting president of the U. S. Chamber of Commerce’s Global Energy Institute.
But the longer-term goal of the oil and gas business — one complicated by this most recent trade impasse — is the ratification of the new trilateral trade agreement between Mexico, Canada and the United States.
Oil and gas companies convinced the Trump administration to carry over a number of protections for investments in Mexico from the North American Free Trade Agreement to the revised USMCA.
Energy companies have built up infrastructure in Mexico ever since it opened its borders to foreign drilling in 2013. Now, they are pressing Congress to ratify the treaty to protect those investments.
Over the weekend, Trump, too, pressed House Speaker Nancy Pelosi (D-Calif.) for not yet scheduling a vote on the new trade agreement over Democrats’ concerns about labor and environmental provisions in it.
Nervous Nancy Pelosi & the Democrat House are getting nothing done.
