Arguments in Favor of Tax Competition
Before the advent of globalization, every country in the world was working in a vacuum when it came to taxes. This is because the companies which operate in these countries did not have any choice when it came to tax rates. Their only choices were to accept the tax rates or to stop production. If […]
The Pitfalls of Quarterly Capitalism
Creating the maximum possible shareholder value had always been the cornerstone of capitalism. All economic theories had always been aimed at maximizing long term shareholder value. However, in the late 90s and early 2000’s, this situation changed rapidly. Instead of reporting annually, companies had to report their profits or losses on a quarterly basis. It […]
Advantages of a Digital Depository System
In the previous article, we learned about what a digital depository system is and how it functions. We also understood the roles and responsibilities played by each participant in the system. In this article, we will continue to understand the depository system further. We will have a look at some of the functions which are […]
How Investors Evaluate Start-up Ideas?
A lot of people are of the opinion that obtaining venture funding can be very difficult for a startup business. This is true to some extent. However, it is also true that a large number of founders in the market do not know what a start-up is. Every company which comes into existence is not […]
Involvement of the Franchisor in Debt Funding
In the previous article, we have already seen that it is common for sporting franchises to raise significant amounts of debt funding. We also know that there are certain special characteristics of sports franchises that need to be taken into account before giving out loans to them. One more such important characteristic of debt funding […]
The American energy sector has really taken off in the past few years.
The discovery of “fracking” or hydraulic fracturing has completely changed the dynamics of the oil and gas industry. The end result has been a historic boom in the oil and gas industry.
For the first time in many decades, America has become self-sufficient in the production of oil. Also, countries like Saudi Arabia are no longer able to dominate America since America is no longer dependent on these nations for its oil import.
At the present moment, America produces more than 10 million barrels of oil per day. It is expected to overtake the production of Russia and become the largest producer of oil in the world.
Up until now, the Trump presidency was a godsend for the oil and gas industry. This industry has always been highly regulated because of the huge environmental impact that it has. However, of late, Donald Trump made the United States exit the Paris Accord. As a result, a lot of regulations that earlier applied to the oil and gas industry no longer apply. Fewer regulations mean less cost. It is this less cost that has made the United States more competitive in the international market.
The oil producing and exploring nations have been put in jeopardy ever since Donald Trump exited the Paris Accord. There are many critics who suggest that the steel and aluminum lobby was funded by the Gulf States to induce Trump to impose duties on foreign made steel and aluminum.
Clearly, the American steel and aluminum industry is the direct beneficiary of this action. However, the Gulf States are the real beneficiaries even though their benefits are not visible to the average person.
It is difficult to believe that Donald Trump would want to hurt the oil and gas industry knowingly. Oil and gas sector have always been on his mental map to “Make America Great Again”. Hence, he seems to have inadvertently placed a huge roadblock on the path of the oil industry.
Hence, the livelihood of millions of Americans who work in the oil and gas sector is at risk because of the tariffs on imported steel and aluminum. Donald Trump’s actions will end up creating few jobs in the steel industry.
However, they are likely to lead to massive layoffs in the oil and gas sector. These policies are just disturbing the balance of free trade. The basic principle of free trade is that countries should produce whatever they can produce most effectively. It seems like America is not very effective in the production of steel. However, the government is trying to force consumers to buy American steel. This is disturbing the cost structure of many industries.
Oil is used for transportation of all goods in general. Hence, a rise in the price of oil will lead to a rise in the price of all goods. Donald Trump’s actions may end up inadvertently causing price inflation in the economy. This is the reason why people from the oil and gas lobby are trying to convince Donald Trump to repeal his tariffs or change their nature. The very existence of American oil and gas industry can be threatened as a result of these tariffs.
America would need more time to prepare itself for a trade war. At the present moment, it is likely that American oil and gas industry may be derailed from its path. Had it been allowed to continue on its path, it would have certainly become the largest producer of oil in the world by 2021.
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