By Irina Slav
Despite the unprecedented global oil production cut agreement from last week, the United States may still impose tariffs on oil imports, Bloomberg reports, citing a Washington official.
“It continues to be something that’s on the table,” Francis Fannon, U.S. Assistant Secretary of State for Energy Resources, told Bloomberg. “It’s certainly something the president had weighed but he consistently said it was a lever he didn’t think he would need to pull.”
Earlier this month, President Trump threatened tariffs on imported oil to speed up an agreement on output cuts between Saudi Arabia and Russia, saying that the U.S. won’t be joining deliberate cuts. Instead, the United States would see its production decline naturally because of low oil prices. Indeed, production is already in decline as companies idle wells.
The U.S. also took on itself the bigger portion of Mexico’s cut quota, as it refused to cut more than 100,000 bpd as part of the OPEC+ agreement.
Even with this agreement and the cuts, the global oil supply overhang is still growing, and it will be a while before it disappears.
“There’s going to be a latency in terms of the supply buildup and how that works its way out. What we’re talking about is huge stores of a physical commodity that have amassed over time,” Fannon said.
The storage problem is shaping up as the next big challenge for global oil. The IEA became the latest in a string of sources warning that the storage tanks are filling up, and the cuts in production may be coming too late.
In response, the U.S. began talks with nine oil companies that could result in the leasing of storage capacity of some 23 million barrels from the Strategic Petroleum Reserve.
One private company, Well Water Solutions and Rentals, is also offering to help with 5 million barrels of storage space, according to its president Sean Lovelace, but it is facing regulatory hurdles.