Oil Price Slump, Tariffs Hit Oilfield Services Sector
Oil prices dropped off a cliff last week after President Trump announced a barrage of tariffs on global trading partners, triggering panic in the trading world. The effect has now rippled across the energy industry, set to discourage production growth—and hurt oilfield service companies. The sector was already worrying about the steel and aluminum tariffs that President Trump introduced last month as part of his radical efforts to revive U.S. industries. The tariffs stand at a hefty 25% and apply to all steel and aluminum imports into the United States. Initially, the effect on the oil and gas industry looked somewhat muted because industry players were not overwhelmingly dependent on imported steel and aluminum. Now, coupled with the tariffs on everything else that pushed oil to the lowest in more than three years, the effect is shaping up to be more pronounced. “Pipes, valve fittings, sucker rods are going to be impacted by tariffs, which will be felt by the big three in particular where they have multi-national sourcing strategies,” Ryan Hassler, vice-president of supply chain research at Rystad Energy, told Reuters recently in comments on the effect of tariffs on the oilfield sector specifically. The publication also reported that Morningstar had reduced its fair value estimates on the three biggest oilfield services majors, expecting them to book a revenue drop of between 2% and 3% this year. Each dollar in lost revenue, the report said, translated into an operating profit loss of between $1.25 and $1.35. A revenue drop of 2-3% is not exactly an unmanageable loss, despite the knee-jerk reaction of traders that saw shares in the big three oilfield service companies take a dive alongside crude last week. Yet it is early days, and the full impact of the tariffs on the energy industry is still to unfold. The focus of this impact will be on drilling activity. As international benchmarks drop, exploration and production companies are going to shrink their drilling plans and hunker down to wait out the downturn, because this is exactly what it is. Oil prices tanked at the end of last week after China retaliated against the fresh 34% tariffs that Trump announced for Chinese imports into the United States with its own 34% additional tariffs—on everything that comes from the U.S. The effect on prices was only natural, given the size and importance of China as an oil importer, as well as an importer of a lot of other things that the U.S. exports to the Asian powerhouse. With the trade war between the two heating up, market players are not feeling a lot of optimism, which has hit oil prices, and with them, the outlook for the oilfield service industry—and it wasn’t particularly bright to begin with. In its latest quarterly energy survey, the Dallas Fed reported that the U.S. oil industry needed oil prices of between $25 per barrel and $45 per barrel to cover its operating expenses across shale and conventional oil. However, they needed prices of between $61 and $70 per barrel to be profitable. West Texas Intermediate is currently trading around $60, and it may have further to fall because OPEC+ decided to change price control tactics at the worst—or best, depending on perspective—time. A day after President Trump announced his latest tariffs, the cartel said it would boost production by three times the amount it initially planned to in May. Instead of 135,000 barrels daily, the group will now add 411,000 bpd to total production next month, citing the “continuing healthy market fundamentals and the positive market outlook.” A lot of commodity analysts would disagree with this perception as they predict a slump in global demand for oil as previously thriving economies grind to a halt amid the tariff push. Yet OPEC+ has run out of options, and it has had to deal with several countries that have consistently failed to stick to the production quota. If it couldn’t get them in line the easy way, it was time for the hard way. All this is quite bad news for the oilfield services sector, which was already having trouble before the whole tariff thing began. Following the string of megadeals in the exploration and production sector, oilfield services companies were faced with a much smaller pool of clients with much more concentrated pricing power. Not only that, but demand shrank, too, with companies combining their operations, as Energy Secretary Chris Wright, then still CEO of Liberty Energy, explained last year. This was supposed to prompt a similar consolidation drive in oilfield services and the prompt will just get stronger with the tariff fallout and the OPEC tactic switch that played a rather instrumental part in last week’s oil price drop. Oilfield service companies are going to consolidate in order to survive. And there is always a silver lining: price routs in oil, whatever the reason, are invariably followed by rallies.
China’s Multi-Month LNG Buying Strike is a Boon for Europe
The escalating trade war between the US and China could increase liquefied natural gas flows to energy-stricken Europe, as China remains on a multi-month buying strike. Bloomberg cited marine traffic data from Kpler, showing that no US LNG shipments are currently inbound or about to be inbound to China. “Zero LNG trade between China and the US is likely to continue for the rest of 2025, with a further increase in China’s tariff on US LNG from the previous 15% to 49%, as a counterstrike against Trump’s steepest tariffs,” Wei Xiong, head of China gas research at Rystad Energy, wrote in a note. She added, “In the meantime, we expect to see more reselling by Chinese companies.” On Feb. 10, China—the world’s largest LNG buyer—imposed a 15% tariff on US LNG shipments. Last week’s tariff escalation, which pushed Beijing’s effective tariff rate on US goods to around 54%, is expected to disrupt trade flows further. In President Trump’s first term, China paused US LNG shipments for about 400 days through April 2020. There’s no telling how long the current buying strike will last as both superpowers duke it out on trade. The good news is that some US trading partners, including Vietnam and Taiwan, have capitulated to the trade war. The other piece of good news is that US LNG shipments originally destined for China can be rerouted to Europe, offering relief as the energy-stricken continent works to replenish inventories after winter and offset the loss of Russian pipeline gas. Goldman’s Samantha Dart told clients late last year that American LNG could “theoretically” replace Russian LNG imports in the EU.
South Korea Seeks More U.S. LNG Imports to Fix Trade Imbalance
South Korea has thrown in the towel without a fight after the U.S. slapped tariffs on all of the country’s trade partners. Seoul is looking at more LNG imports to get Washington to drop the new tariffs. Per a Bloomberg report, the South Korean government is working on several packages of measures to be taken to erase the trade surplus it has with the U.S. in a bid to convince President Trump to remove the additional tariffs, with the focus on boosting imports instead of cutting exports. “We need to adjust the US trade balance, which is a surplus from our perspective, to reduce US tariffs,” South Korea’s trade minister, Cheong Inkyo, told media as quoted by Bloomberg ahead of a two-day trip to Washington. “It is difficult to reduce exports, so we need to increase imports.” South Korea has a very export-focused economy, which has served it well until now. Last year, the country booked a trade surplus of $55.7 billion with the United States, which automatically put it in the category of “abusers,” as President Trump called the countries running trade surpluses with the U.S. Trump slapped a 25% tariff on South Korean imports—one of the highest. “We’ve already expressed our regret about this, and this time, too, we will raise the fact that the US calculated such a high tariff rate for a country that has been implementing the Korea-US FTA for 12 years,” Cheong also told reporters. The range of tariffs that President Trump announced last week is between 10% and as much as 49%, with some of the United States’ biggest trade partners and closest allies getting a higher rather than a lower rate as they might have hoped for based on their geopolitical closeness with Washington. India, for instance, got slapped with a tariff rate of 26%. China, which the U.S. sees as a geopolitical adversary, was hit with a 34% additional tariff rate.
India’s oil minister flags higher petrol, diesel prices in Opposition-ruled states after hiking excise tax
Union Oil Minister Hardeep Singh Puri on Tuesday flagged his concerns over price differences between BJP and Opposition-ruled states, a day after excise duty on petrol and diesel were raised by Rs 2 per litre. “There is a difference of at least Rs 10-12 per litre in BJP-ruled states and Opposition-ruled states,” said Puri. The minister was speaking at CNN News18’s Rising Bharat Summit 2025. “Prices in BJP-ruled states have already started coming down. When prices went up internationally, we have tried to not hurt the consumers,” added Puri. The government hiked excise duty on petrol and diesel by Rs 2 per litre on Monday, using the opportunity provided by the falling international oil prices to shore up its revenue. Shares of state-run oil marketing companies gained up to 4% on Tuesday after the hike. The duty hike will not push up pump prices but the government has allowed companies to raise cooking gas prices on which there was no tax increase. Cooking gas or LPG prices will rise by Rs 50 per cylinder from Tuesday. After the hike, a 14.2 kg refill will cost Rs 553 to Ujjwala customers and Rs 853 to others in Delhi. The duty hike on petrol and diesel will fetch the government Rs 32,000 crore in additional revenue in a year. Monday’s duty hike falls into a pattern the government has followed for a decade – raising duties to mop up the gains from a decline in international oil prices leaving limited benefits for oil companies and consumers. The government raised duties on fuels after the international oil prices crashed in 2014-15 and in 2020. The government has also cut duties in the past ahead of elections as well as to ease inflationary pressures. The recent fall in global crude prices has not yet translated into a fuel price relief for Indians, yet. However, Oil minister Hardeep Singh Puri hinted at a ‘wait and watch’ approach with respect to a cut in petrol and diesel prices. In February, Nirmala Sitharaman had slashed personal income tax for the middle class, leaving a dent in the Centre’s direct tax revenue estimates. The Modi government also scrapped windfall taxes, giving major relief to oil companies like Reliance Industries, Nayera etc. As for the latest excise hike, Puri said the extra Rs 2 duty will add to the general kitty, and it will be utilized for reimbursing the LPG losses of the same (oil marketing) company.
Goldman warns oil below $40 is possible in ‘extreme’ scenario
Goldman Sachs Group Inc. — fresh from cutting oil forecasts twice in a week — said Brent has the outside potential to fall below $40 a barrel under “extreme” outcomes as the trade war flares and supplies rise. “In a more extreme and less likely scenario with both a global GDP slowdown and a full unwind of OPEC+ cuts, which would discipline non-OPEC supply, we estimate that Brent would fall just under $40 a barrel in late 2026,” analysts including Yulia Grigsby said in an April 7 note. That view does not represent the bank’s current base-case outlook, which has Brent at $55 next December. The global oil market has been rocked in recent sessions as the Trump administration’s escalation of the trade war, plus pushback from some other economies including China, raised recessionary risks and headwinds for energy consumption. At the same time, OPEC+ has pivoted, adding more barrels back than had been expected after a long period of supply restraint. Against that backdrop, banks including Goldman Sachs, Morgan Stanley and Societe Generale SA have cut base-case oil-price forecasts, as well as exploring less likely bearish and bullish outcomes, as is common in commodity forecasting to scope out a range of scenarios under different conditions. Assuming a “typical” US recession, plus baseline expectations for supply, Brent was seen at $58 a barrel this December, and $50 in the same month next year, the Goldman analysts said in the note, titled “How Low Could Oil Prices Go?” Brent was last at $65.05 a barrel, after hitting a four-year low on Monday.
Why is Modi govt increasing petrol, diesel excise duties even when global oil prices are decreasing?
The government on Monday hiked excise duty on petrol and diesel by Rs 2 per litre. At a time when global crude prices are on a steady decline, the hike signals a fresh focus on ramping up govt revenues for possible capital expenditure after tax relief given in the Union Budget 2025. It may be noted here that the added cost won’t have to be borne by the ‘aam aadmi’. But they are set to pay Rs 50 per LPG cylinder more, starting tomorrow. Interestingly, fall in global crude prices has not yet translated into a fuel price relief for Indians, yet. However, Oil minister Hardeep Singh Puri hinted at a ‘wait and watch’ approach with respect to a cut in petrol and diesel prices. “Today I can tell you seriously. If the audience asks when will fuel prices come down further, I would say if this trend (low crude prices) continues, there is reasonable expectation (of a fuel price cut),” Puri said. In February, Nirmala Sitharaman had slashed personal income tax for the middle class, leaving a dent in the Centre’s direct tax revenue estimates. The Modi government also scrapped windfall taxes, giving major relief to oil companies like Reliance Industries, Nayera etc. As for the latest excise hike, Puri said the extra Rs 2 duty will add to the general kitty, and it will be utilized for reimbursing the LPG losses of the same (oil marketing) company. History is testament to the fact that the Modi government has, never in the 11 years of their rule, passed the benefit of low global oil prices, even when crude oil prices had fallen below zero in 2020, for the first time in history. A look back at the excise duty trajectory Between November 2014 and January 2016, the government had raised excise duty on petrol and diesel nine times, capitalising on a global crude oil crash. In that 15-month period, excise duty on petrol rose by Rs 11.77 per litre, while that on diesel jumped by Rs 13.47 per litre. This helped excise collections surge from Rs 99,000 crore in FY15 to a whopping Rs 2.42 lakh crore by FY17. Since then, fuel tax policy has swung with the tide of global crude prices. The Centre slashed excise by Rs 2 in October 2017 and again by Rs 1.50 in 2018. But in July 2019, it was back up by Rs 2 per litre. In March 2020, the government hiked excise duty by Rs 3 per litre on both petrol and diesel, and in a dramatic step, raised it again by Rs 13 and Rs 16 per litre respectively by May 2020. However, much of that was rolled back over the next two years as global crude prices surged to record highs, pushing petrol rates in Delhi to Rs 105.41 per litre and diesel to Rs 96.67 at their peak. Notably, just before the 2024 general election announcement, the Centre had trimmed fuel prices by Rs 2 per litre as a populist relief measure.
LPG price raised by Rs 50 per cylinder
The price of LPG cylinders has been increased by Rs 50 per 14.2kg cylinder for both subsidised and non-subsidised consumers with effect from April 8, Petroleum and Natural Gas Minister Hardeep Singh Puri announced on Monday. The price increase applies to both Pradhan Mantri Ujjwala Yojana (PMUY) beneficiaries as well as other consumers. “For PMUY beneficiaries, the price will rise from Rs 500 to Rs 550 per cylinder. For other consumers, it will increase from Rs803 to Rs 853,” the minister said.
India hikes excise duty on petrol and diesel
The excise duty on petrol and diesel was increased by ₹2 per litre each, effective April 8, 2025. The new rates are ₹13 per litre for petrol and ₹10 per litre for diesel, up from ₹11 and ₹8 per litre, respectively, according to the Ministry of Petroleum and Natural Gas website. No, the retail prices of petrol and diesel are not expected to rise immediately, as the Ministry of Petroleum and Natural Gas has stated that public sector oil marketing companies (OMCs) will absorb the hike, offsetting it against a potential reduction in retail prices due to lower international oil prices, as reported by CNBC-TV18. In fact, Oil Minister Hardeep Singh Puri even said that retail fuel relief is likely if international crude oil prices drop below $65 per barrel. Who receives the revenue from this excise duty hike? The revenue from the excise duty hike goes to the central government and is collected by the Department of Revenue under the Ministry of Finance. It contributes to the national exchequer, funding various public expenditures such as infrastructure, healthcare, and subsidies.