https://asiatimes.com/2020/05/china-has ... ard-on-us/
China will likely withhold promised big new energy purchases if US ramps up new trade tensions
DA NANG – The Donald Trump administration is ramping up retaliatory rhetoric against China over its handling of the coronavirus crisis and its corresponding devastation, a renewed trade war threat that promises to hit US energy producers if and when China retorts in kind.
Last month, Trump said he was considering new tariffs on Chinese goods on top of an existing 25% levy punitively imposed on some US$370 billion worth of Chinese goods. If implemented as threatened, it will be bad news for America’s already beleaguered oil and gas producers.
US producers have already been hurt by the trade war. US crude oil exports to China, the world’s largest importer, were zilch in the first quarter of this year due to trade tensions. That’s eroded hard-fought market share US producers had previously steered away from entrenched Chinese suppliers, including oil kingpins Saudi Arabia, Russia and others.
US liquefied natural gas (LNG) imports to China were also hit last year by a punitive 25% levy, throwing several US LNG project proposals into doubt due to the likely lack of long-term Chinese off-take deals. Those proposals have also been stymied by the likely lack of Chinese investment needed to reach final investment decisions (FID).
In April, China procured its first US LNG cargo since March 2019, and has signaled that as many as four more are on the way. Now, with Trump’s ramped up trade war rhetoric and anti-China messaging in his re-election campaign, those promised new LNG imports will be in jeopardy if the US leader pushes through with his new threats.
China has not indicated how it would respond to a renewed trade war push, but last year’s tit-for-tat gives some indication on the energy front. In March 2019, as trade tensions spiked, Beijing hit US LNG imports with a 10% levy, then upped that duty to a prohibitive 25%.
The tariffs strategically hit the US energy industry’s underbelly, namely its LNG sector, which is increasingly trying to compete with top producers like Australia, Qatar and others for global market share.
What I find utterly absurd about this scenario is that the global prices of both oil and natural gas are well below production costs in the USA - and likely to remain so for years to come.
So it stands to reason that each barrel of oil exported from the US to China at a loss to producers would amount to subsidised energy provided to the PRC by the USA at cost to the latter.
(To compound their error, they now want to tie up the markets of other importing countries like Japan, South Korea, India and Vietnam with the same loss-making product.)
Luckily China has been merciful towards the USA by not insisting on deliveries from that source but has continued importing oil and LNG from alternative sources where the price is presumably far closer to production costs.
What a farcical trade war!
Wake up, you bunch of dopes! It is a buyers' market for oil and gas out there now - not a sellers' market.