March 28 (UPI) — Steel tariffs and the pace at which U.S. oil production is accelerating could act as a short-term throttle to momentum, the International Energy Agency said.
The United States is on pace to become the largest oil producer in the world, possibly passing Russia at some point in the very near future. Most of the U.S. production comes from a handful of shale basins in the country and the more lucrative ones are in Texas.
The IEA said it expects production from the Eagle Ford and Permian basins will increase by as much as 2.7 million barrels per day in the next five years. That means it’s critical that pipeline and port infrastructure developments keep up.
Olivier Lejeune, an oil analyst at the IEA, said in commentary published Wednesday that infrastructure capacity will constrain the sector in the southern U.S. shale belt.
“Ultimately, Permian and Eagle Ford takeaway capacity is likely to become insufficient by mid-year, with a deficit possibly reaching as much as 290,000 barrels a day during the first half of 2019,” he wrote.
The federal government estimates oil production from the Eagle Ford shale will increase marginally by April to 1.3 million barrels per day. Output from the Permian basin could increase 2.6 percent from the March rate of 3.07 million barrels per day.
The Commerce Department, meanwhile, said it was following through with a “well-thought-out process” by moving ahead with tariffs on steel and aluminum. U.S. President Donald Trump signed off on the tariffs, saying they were necessary to protect national security and critical industries.
Parts of the energy sector disagreed. Jack Gerard, the president and CEO of the American Petroleum Institute, said the president’s announcement of a 25 percent tariff on steel imports and a 10 percent tariff for aluminum was inconsistent with Trump’s goal of U.S. energy dominance.
The U.S. steel sector targets the automotive industry, leaving the energy industry depending on a few niche, and overseas, suppliers. Lejeune said those tariffs “certainly have the potential” to slow down some pipeline projects, but probably won’t derail them.
Coastal port infrastructure also needs to keep up. The port at Corpus Christi is the fourth largest sea port in the country by tonnage, the largest crude oil export terminal and, by 2020, could be one of the largest points for liquefied natural gas leaving the United States. Improvements carry an annual price tag of $100 million.
The IEA estimates, however, that pipeline and export limitations will ebb as more investments emerge. Total U.S. export capacity could increase from the 1.9 million barrels per day on average last year to 4.7 million barrels per day in 2020