Here’s What Trump’s New Trade Deal With Mexico Means For The Energy Industry
President Donald Trump’s new trade pact with Canada and Mexico contains provisions that free up the energy industry to continue expanding U.S. natural gas exports into Mexico without worrying about tariffs.
The U.S., Mexico, and Canada Agreement (USMCA) focuses mostly on differences between the countries on the exportation of automobiles. But it does allow for continued market access for U.S. gas and investments in Canada and Mexico, which is highly dependent on U.S. natural gas exports.
The oil industry’s biggest lobbying group is pushing Congress to pass the deal.
“We urge Congress to approve the USMCA,” API President and CEO Mike Sommers said in a statement Monday morning. “Having Canada as a trading partner and a party to this agreement is critical for North American energy security and U.S. consumers. Retaining a trade agreement for North America will help ensure the U.S. energy revolution continues into the future.”
Some in the energy industry were concerned Trump’s decision to rip up the more than 25-year-old North American Free Trade Agreement would dramatically affect oil producers’ ability to capitalize on Mexico’s growing natural gas market.
“For the energy sector, there was never really a huge amount of positive stuff that could come out of this,” Sarah Ladislaw, senior vice president and director of the Energy and National Security program at the Center for Strategic and International Studies, told reporters in August.
She said: “This was about making sure a whole lot of bad things didn’t happen. Protecting that free trade status with Mexico given how much we are trading is a win and a benefit for the Trump administration.”
Mexico accounts for the bulk of U.S. gas exports, with 90 percent coming from pipelines and the rest from LNG. The country receives roughly 60 percent of its total gas supply from the U.S., while oil production inside Mexico has fallen nearly 45 percent since 2010.
Those numbers are unlikely to change much once newly-elected Mexican President Andrés Manuel López Obrador (AMLO) takes office in December. AMLO has expressed a desire to ban fracking, which could give the U.S. an even larger market share in Mexico.
Mexico’s appetite for natural gas has grown rapidly, as the country’s energy industry expects to increase its natural gas use for electric power generation by about 50 percent over the next five years. (RELATED: US On Its Way To Becoming A Major Natural Gas Exporter Under Trump)
Pipelines such as Rover and Nexus Gas Transmission are being built to shuttle gas from the Marcellus and Utica supply regions in Ohio, Pennsylvania, and West Virginia into areas on the Gulf coast and eastern Canada. USMCA is not expected to derail any future exports or pipeline constructions between the countries.