Trump tariffs wreak havoc on U.S. energy sector
(Washington) A recent analysis by Wood Mackenzie (WoodMac) has uncovered the detrimental impact of the sweeping U.S. tariffs imposed by the Trump administration on the nation’s energy sector.
The repercussions span from oil production to the advancement of renewable energy, painting a grim picture for the industry’s future
WoodMac’s research paints a bleak picture of how the Trump administration’s tariff strategies are adversely affecting the U.S. energy sector.
The analysis suggests that these policies could impede anticipated growth in oil demand, hinder investments in renewable energy, and push the country towards a high-cost energy isolation that undermines its global competitive edge.
Released in late May, the research highlighted President Trump’s tariff announcement on 2nd April as a critical moment, akin to China’s entry into the World Trade Organisation in 2001.
However, unlike China’s positive impact on global growth, the U.S. tariffs and ensuing retaliations are poised to disrupt established trade relations and hasten the retreat from globalisation.
WoodMac’s study presents three scenarios to evaluate the repercussions of Trump’s trade measures, with the most severe scenario envisioning U.S. effective tariff rates exceeding 30 per cent. Under this scenario, global GDP is forecasted to shrink by 2.9 per cent by 2030.
The oil industry, crucial for U.S. energy independence, faces significant challenges under the current tariff regime. In the worst-case scenario, global oil demand could witness a sharp decline in 2026, with subsequent recovery but still lower demand by 2030 compared to more optimistic projections.
The analysis forecasts oil prices to drop to an average of $50 per barrel in 2026, which could severely impact U.S. shale producers. The implications extend to investment reductions, lower oil production, and delays in global supply growth outside the United States.
Within the power sector, tariff-related costs and uncertainties pose obstacles to investment and supply expansion. WoodMac’s report underscores the disruptive nature of this uncertainty on long-term planning cycles, prompting companies to adjust strategies and defer investments.
The tariffs solidify the U.S.’s status as a high-cost hub for renewable energy and storage, contrary to the administration’s aims of reshoring manufacturing and reducing reliance on foreign supply chains.
Source: Dimsumdaily.hk
