US shale shippers to foot bill for Trump steel tariffs

US-China trade friction has led to the imposition of tariiffs on goods, with steel at the heart of the conflict. Now, rising costs are being passed on to other US industries, including fuel. (Shutterstock)
Updated 03 August 2019

US shale shippers to foot bill for Trump steel tariffs

  • Pipeline operators begin to introduce fees to pay for cost of administration’s China trade war

BEIJING: Plains All American Pipeline said it will tack on a fee for users of a new oil pipeline to pay for the cost of the Trump administration’s imported steel tariffs, becoming the first US operator to do so.

In addition to steel levies announced last year, President Donald Trump said on Thursday he plans to expand US tariffs to $300 billion of Chinese imports in a trade dispute that has increased costs for US consumers on everything from steel to electronics.

Houston-based Plains will begin charging shippers a 5 cents per barrel fee on its 670,000 barrel-per-day (bpd) Cactus II pipeline next April to offset higher construction costs from “governmental regulation and tariffs,” according to a filing with the Federal Energy Regulatory Commission.

Plains last year estimated the 25 percent steel tariff would add $40 million to its costs for the $1.1 billion pipeline, which runs 550 miles (885 kilometers) from the Permian basin of West Texas and New Mexico to the US Gulf Coast.

The Trump administration last year imposed tariffs on imported steel and aluminum to shield US producers and jobs from overseas competition. It was one in a series of tariffs imposed by Trump since becoming president in 2017.

“This is an example of how harmful trade policies such as steel tariffs and quotas are hurting the US energy industry, economy, and potentially energy consumers,” said Natalia Sharova, a spokeswoman for the trade group American Petroleum Institute.

Two other new pipelines could also raise their prices if Plains’ surcharge sticks, three analysts said. They pointed to Kinder Morgan Inc’s Gulf Coast Express pipeline and an EPIC Midstream pipeline, which were constructed after the steel tariffs were levied.

“There’s certainly a risk of them passing on inflationary costs,” said Kendrick Rhea, an analyst at industry researcher East Daley Capital.

“This is an issue for the next go-around of pipelines,” added Matthew Blair, an analyst at Tudor, Pickering, Holt & Co.

Kinder Morgan declined to comment. EPIC did not immediately respond to requests for comment.

Plains Chief Executive Officer Willie Chiang last year told a congressional hearing that the tariffs on critical energy projects could have “significant unintended consequences that could undermine important progress toward realizing American energy independence, strengthening national security and improving the balance of trade.”

The US Commerce Department rejected Plains’ two initial requests for a waiver, and the company has filed a third request, said Brad Leone, a Plains spokesman. He did not say how much the surcharge would raise.

“It’s making it clear the steel sanctions are increasing costs,” Sandy Fielden, an analyst at financial services firm Morningstar, said of the company’s new fee. “The shipper’s going to have to pay, come what may.”

Plains disclosed spot tariff rates on the new pipeline from $4.75 to $5.60 per barrel, according to Friday’s regulatory filing, when the tariff went into effect.

It is one of three new pipelines entering service over the next few months and is expected to relieve a bottleneck that has weighed on regional oil prices for over a year.

Permian crude differentials rallied on market speculation that the Cactus II pipeline will begin service in August, traders said.

Pipeline operator EPIC Midstream Holding recently began filling a new 400,000 bpd crude pipeline from the Permian basin, and expects to begin making deliveries this quarter, President Brian Freed said in an interview with Reuters.


Philippine jobless rate hits record 17.7% in April due to pandemic

Updated 05 June 2020

Philippine jobless rate hits record 17.7% in April due to pandemic

  • The Philippines is facing its biggest economic contraction in more than three decades
  • April’s 17.7 percent unemployment rate equivalent to 7.3 million people without jobs

MANILA: The Philippines’ unemployment rate surged to a record 17.7 percent in April, the statistics agency said on Friday, as millions lost their jobs due to a pandemic-induced lockdown that battered the economy.
The Philippines, which before the pandemic was one of Asia’s fastest growing economies, is facing its biggest contraction in more than three decades after the new coronavirus shuttered businesses and crushed domestic demand.
April’s unemployment rate, which is 7.3 million people without jobs, compares with 5.3 percent in January and 5.1 percent in April last year.
“We should not lose sight of the fact that this loss in employment is really temporary,” Economic Planning Undersecretary Rosemarie Edillon said in an online news conference.
The lockdown in the capital, Manila, which was one of the world’s longest and strictest, was relaxed as of June 1 to allow much-needed business activity to resume and soften the economic blow of the coronavirus, which has infected more than 20,000 in the country.