• 15 hours 2021 Could Be A Huge Year For Chinese Stocks
  • 2 days Shadowy Brokers Target Easy TikTok Money In New Scheme
  • 3 days Cannabis Sales Are Soaring In The United States
  • 4 days Biden Will Be A Boon For Solar Stocks
  • 5 days The Shroom Boom Is Here To Stay
  • 8 days The Gold Rally Has Finally Run Out Of Steam
  • 8 days Citibank Analyst Predicts $300k Bitcoin By End Of 2021
  • 11 days Bitcoin Lives Up To Its Safe Haven Status In A Big Way
  • 11 days 14 Million People Will Lose Unemployment Benefits On December 31st
  • 13 days Why 12 Million American Millionaires Isn’t Good News
  • 14 days Big Oil Is Paying The Price For Investing In Renewables
  • 15 days The Banking Industry’s $35 Billion Gravy Train Could Disappear
  • 16 days Did Amazon Just Democratize Prescription Drugs?
  • 17 days The Private Space Race Just Got Very Real
  • 19 days Short Sellers Are Willing Big In This Turbulent Market
  • 20 days SpaceX Gets Go-Ahead To Send Humans Into Space
  • 21 days Saudi Arabia Lost $27 Billion In Oil Crash
  • 22 days China’s Big Tech Takes A Hit As Regulators Crack Down
  • 23 days Black Friday Could Be Retailers’ Only Hope
  • 24 days Why You Should Not Dump Your Stay At Home Stocks Just Yet
Aramco Dividend Won’t Cover Saudi Budget Gap

Aramco Dividend Won’t Cover Saudi Budget Gap

The massive US$75-billion annual dividend…

China's Economic Recovery Remains Tepid

China's Economic Recovery Remains Tepid

Smartphone shipment data from China…

Black Friday Could Be Retailers’ Only Hope

Black Friday Could Be Retailers’ Only Hope

Get ready for Black Friday--even…

Oilprice.com

Oilprice.com

Writer, OilPrice.com

Information/Articles and Prices on a wide range of commodities: We have assembled a team of experienced writers to provide you with information on Crude Oil,…

Contact Author

  1. Home
  2. Markets
  3. Economy

Tariffs Jeopardize $1 Trillion In Energy Investments

Street

India is the fastest-growing energy market in the world as demand for energy on the subcontinent booms. On this, analysts are unanimous. They are also unanimous that the energy reform begun by PM Narendra Modi during his first term in office offers a host of lucrative opportunities for foreign energy and infrastructure companies. Now that Modi has won a second term, these opportunities remain. Yet a brewing tariff spat with the United States might end up closing some doors for U.S. companies.

It all began with the U.S. refusing to exempt India from higher import duties on steel and aluminum. Then President Trump whose administration has been actively seeking ways to open up more of the Indian market to U.S. companies, even at the expense of local businesses, removed India from its list of countries with a preferential trade treatment. Now, India has responded with import tariffs on 28 U.S.-made goods.

Now, these tariffs cover things like apples and almonds and are largely symbolic but if things escalate as we have seen them escalate with China, the energy industry may get drawn into the spat. And while India has more to lose from a trade war at this point, when it comes to energy, U.S. companies will suffer, too, especially those involved in LNG exports. Related: Trader Compares Current Market Environment To 2007

There are energy projects worth US$1 trillion awaiting investments in India. These range from pipelines to power generation capacity to transmission lines in a country where power outages are part of life. There are also plans to boost the share of natural gas in the energy mix from 7 percent now to 14 percent, writes Dipka Bhambhani for Forbes. That’s a lot of opportunities for any energy company. Chances are there will be a lot of competition for these projects and for supplying India with the gas it will need in growing amounts. A trade spat at this point is not the smartest move.

India is already troubled by higher oil prices and the U.S. sanctions on Iran that have closed a door to cheap Iranian crude. India has in this respect acted as a loyal U.S. ally, suspending oil imports from Iran the moment the sanction waivers expired. But now it may be considering restarting the purchases of Iranian crude because of price concerns. It is also trying to negotiate a better oil deal with the U.S.

The country is also increasingly thirsty for LNG. So thirsty, in fact, that the next national budget may dispense with the import duties on the commodity, which currently stands at 2.5 percent. LNG is the greener alternative to coal for power generation, so demand for it is bound to increase strongly and steadily in India in the coming years. And competition in the LNG space is already intense amid a glut and millions of tons in new capacity coming on stream in Australia and the U.S.

Analysts have pointed out that India’s retaliatory tactic may backfire. "If the US chose to respond with retaliatory tariffs on labour-intensive exports such as gems, jewellery and textiles, [or] more pushback on IT services, it would cause far more damage to [India's] economic outlook," the head for India at Oxford Economics, Priyanka Kishore wrote in a note earlier this week.

Yet India can do some harm to U.S. energy companies, too, by picking competitors from elsewhere for its infrastructure projects. And LNG? Everyone from Australia through Qatar to Russia would be happy to step in and replace U.S. LNG for India. A lot of it would be cheaper as well. It seems it would be best if both countries thread a bit more carefully in their trade negotiations so they could continue reaping the benefits of their partnership.

By Irina Slav for Oilprice.com

More Top Reads From Safehaven.com:

Back to homepage

Leave a comment

Leave a comment