Editorial comment
Energy markets used to hinge on OPEC meetings. When OPEC meetings were the main event, twice a year we’d ritualistically pore over the reports coming out of Vienna. Analysts would dissect the quota news like it was gospel and markets would react immediately. Traders would mull over production targets vs actual output, speculate about compliance and make estimates about spare capacity. It was all about decoding OPEC’s body language, and what that meant for global supply/demand balance going forwards.
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In 2025, it seems the energy markets swing on tariff tweets and trade disputes. Now, we find ourselves decoding presidential social media posts, watching customs data and monitoring LNG shipping routes, to see how the latest tariffs are playing out. Supply and demand models that forecast wellhead output also need to simulate global chess moves. We must now consider concepts such as ‘tariff pass-through’ and ‘retaliation windows’ when we forecast market behaviour.
How have we got here, to a place where tariffs are now a frontline force shaping the energy landscape? Tariffs are a tax on imports, commonly used to protect domestic industry or to counteract ‘unfair’ trade practices imposed by another country. When tariffs are applied to commodities like oil and gas (or the steel, machinery and technology they rely on), those taxes ripple through entire value chains. In the late 2010s, the US imposed sweeping tariffs on key trading partners, including China, under the banner of economic nationalism; this has now become a long-term trade policy. In the early months of 2025, President Trump announced a raft of new tariffs, including tariffs on steel imports. US tariffs have now become a rolling feature of global energy negotiations.
A new report from GlobalData states that tariff-related disruptions will outweigh other oil and gas themes in 2025.1 ‘Top 20 oil & gas themes - 2025’ asserts that “tariff-induced trade tensions might exert downward pressure on the US and global economy in the near term, potentially affecting the energy demand. It is therefore important for the industry to assess the impact of macroeconomic themes of tariffs, along with geopolitics, and supply chain while charting out its growth plans”.
Wood Mackenzie released a modelling scenario in May (‘Trading cases: Tariff scenarios for taxing times’) that presents three distinct futures for the global energy landscape, highlighting the far-reaching implications of ongoing trade tensions for the energy and natural resources sectors.2 The report presents three possible outlooks for the global energy and natural resources industries: Trade Truce (the most optimistic), Trade Tensions (the most likely) and Trade War (the worst outcome). Each paints a different picture for global GDP, industrial production and the supply, demand, and price of oil, gas/LNG, renewable power and metals to 2030. The modelling shows how divergent trade paths could create oil demand swings of nearly 7 million bpd by 2030.
Investors in upstream projects must now consider things like: will this rig get hit by a steel import tax? Will China retaliate by pulling its LNG demand? Will essential technology be delayed at customs? Of course, for some domestic producers, tariffs will be a windfall. Protectionist trade policy can act as a buffer against foreign competition, driving demand for local resources and equipment, and renewing interest in homegrown business. Regardless, upstream players can no longer afford to be passive: trade policy is now energy policy, and those who read the tea leaves fastest may just stay ahead of the curve.
1. https://www.globaldata.com/store/report/top-20-oil-and-gas-theme-analysis
2. https://www.woodmac.com/horizons/tariff-scenarios-taxing-times/
