By Mitch Borden
The United States has been in a trade war with China for almost a year now. Many thought a resolution was on its way until the Trump Administration announced last week it would be placing tariffs worth about $200 billion on Chinese goods. This action renewed the conflict, which may have broad impacts for the U.S. economy and the Permian Basin’s oil industry.
Currently, the West Texas oilfield is doing pretty well. The region’s oil prices are hovering around $60 and the area’s production is expected to shoot up at the end of the year when new pipelines come online.
Matt Smith of ClipperData, a firm that analyzes oil production and its transportation, said the U.S.-China trade war could slow things down for America’s largest oil field.
“Things could just turn south if we do see the economic picture starting to sour somewhat.”
China has been a leading importer of U.S. oil, but now people are waiting to see if the Chinese government will place restrictions on imported American oil in response to the Trump Administration’s new tariffs.
Smith said even if China doesn’t limit its oil imports there may be a bigger problem on the horizon for the Permian: the possible slowing of the global economy as a result of the trade war.
“Well, the concern is for the oil price mainly. If we do see oil prices drop because there is some kind of global slowing.”
With a lull in the U.S. and World economies, Smith believes a drop in the price of oil would have a negative effect on West Texas oil fields.