US tariffs to trigger energy crisis amid global economic uncertainty: research
SACRAMENTO: The sweeping US tariffs imposed by the administration of Donald Trump are inflicting severe damage across the country's energy sector, from oil production to renewable power development, a new analysis revealed.
The Trump administration's tariff policies are backfiring spectacularly on the US energy sector, with new research by Wood Mackenzie (WoodMac), a leading energy and natural resource analytics consulting firm, showing that trade wars could erode projected growth in oil demand, hinder renewable energy investment and force the country into a high-cost energy isolation that undermines its global competitiveness.
The research, released late May, said that President Trump's "Liberation Day" tariff announcement on April 2, represents "arguably the most pivotal moment for the world economy since China's 2001 entry into the World Trade Organization."
However, unlike China's entry, which boosted global growth significantly, the sweeping US tariffs and international retaliation threaten to devastate established trading relationships and accelerate the retreat from globalisation, according to the firm.
WoodMac developed three scenarios to assess the impact of Trump's trade policies, with the most severe "trade war" scenario projecting US effective tariff rates exceeding 30%. Under this scenario, global GDP is projected to contract by 2.9% by 2030, according to its analysis.
The oil industry, a cornerstone of US energy independence, faces particularly severe consequences under Trump's tariff regime. In the worst scenario, global oil demand would experience an "outright fall" in 2026. Demand growth would resume from 2027, but overall demand by 2030 would still be 2.5 million barrels per day lower than under the most optimistic scenario.
Oil prices would plummet to an average of $50 per barrel in 2026, dealing a devastating blow to US shale producers, as WoodMac's research demonstrates that "the economics of Lower 48 drilling won't support production growth with crude at $50 per barrel, despite corporate ambitions to keep pushing down breakeven."
The price collapse would force significant reductions in investment and lead to lower US oil production through 2030. Supply growth outside the United States would also suffer from reduced budgets for upstream projects, with delays expected in developments not yet under construction.
In the power sector, the added costs and uncertainty created by the tariffs build barriers to investment and make it more difficult to increase supply.
"In a business with a five-to-10-year planning cycle, not knowing what a project will cost next year or the year after is extraordinarily disruptive," the WoodMac report said. The consultancy noted that many companies had already reported adjustments to strategy and business plans, including deferrals of investments.
The tariff barriers effectively cement the US position as a high-cost location for renewable energy and storage.
The Trump administration had promoted tariffs as a tool to encourage manufacturing reshoring and reduce dependence on foreign supply chains. However, the analysis suggested these policies are achieving the opposite effect in critical energy sectors.
The metals and mining sector, essential for energy infrastructure, will suffer particularly severe impacts. Aluminium demand falls by almost 4 million tonnes in 2026, with copper down 1.2 million tonnes, compared to baseline projections. Steel demand drops by a projected 90 million tonnes and lithium demand by 70,000 tonnes.
The analysis said that companies in the energy and natural resources industries must now "reckon with uncertainty over tariffs persisting for months, and probably years, to come." The firm warned that, without a doubt, riskier investments will be pared back, and strategies that create increased flexibility will be prioritised, fundamentally altering the trajectory of US energy development for years to come.
By RSS/Xinhua
