Trump tariffs may already be impacting the offshore oil and gas industry
By Bruce Beaubouef, Managing Editor
US President Donald Trump’s recently enacted tariffs are expected to have some level of negative impact on the oil and gas industry in the US Gulf of Mexico (GoM) and even beyond. These impacts are expected to arise from a mix of direct cost pressures, supply chain disruptions and broader economic ripple effects.
These tariffs include a 25% levy on most goods from Canada and Mexico (with a 10% rate on Canadian energy products) and a 10% tariff on Chinese imports, alongside expanded tariffs on steel and aluminum. In turn, these tariffs are expected to have some impacts on the supply chain that feeds offshore E&P. These impacts are detailed below.
Direct cost increases
The offshore oil and gas industry relies heavily on steel for tubulars (casing, tubing, risers) and equipment like platforms and subsea systems. The expanded Section 232 tariffs on steel and aluminum, effective Feb. 10, 2025, have driven up costs significantly. Industry reports indicate that prices for steel pipes—critical for well completions—jumped 15-25% shortly after the tariffs were announced.
For example, hot-rolled coil steel (used in oil country tubular goods, or OCTG) is projected to hit $890 per short ton in 2025, a 15% rise from 2024 averages, per S&P Global Commodity Insights. Offshore wells, which can cost $50 million to$100 million each in the deepwater GoM, typically see OCTG expenses accounting for roughly 8-10% of drilling and completion costs. A 25% steel price hike could add $1 million to $2 million per well, squeezing margins for operators like Chevron or bp, especially with high-cost HP/HT projects like Anchor or Kaskida.
Supply chain challenges
Canada supplies 16% of US OCTG imports, and Mexico contributes to broader steel and equipment flows. The 25% tariff on Canadian and Mexican goods (with energy at 10%) disrupts this integrated North American supply chain, built under NAFTA and the USMCA. Offshore service firms that source steel-intensive components now face higher input costs or delays if they pivot to domestic suppliers with limited capacity. Comments from industry observers in March seem to echo this, noting a 25% immediate cost increase for casing and tubing, with warnings of reduced drilling activity.
Meanwhile, the 10% tariff on Chinese imports hits equipment like valves, fittings and subsea hardware, where China is a key low-cost supplier. Goldman Sachs suggests these tariffs won’t drastically shift global oil prices short-term, but they do burden US refiners and offshore operators reliant on imported intermediates.
Industry response and production trends
Despite rising cost pressures, production in the US GoM is holding steady, with the US EIA forecasting 1.9 million bbl/d in 2025, up from 1.8 million in 2024, driven by new fields like Whale and Winterfell. The president’s “drill, baby, drill” mantra, bolstered by a few deregulatory moves, is aiming to offset tariff costs with higher output. However, smaller operators may scale back if steel and equipment costs erode profitability, especially in marginal fields. Larger Gulf players that have tied back new fields to existing platforms are better positioned to weather this, leveraging economies of scale.
Bottom line
For producers in the US GoM, Trump’s tariffs are, at the very least, adding uncertainty to an industry already navigating Biden-era leasing limits, pandemic-induced supply chain disruptions and a global energy transition.
The tariffs are expected to add 2-5% to overall project expenses in the US GoM, the result of higher steel and equipment costs, modest fuel price risks, and supply chain friction.
The US GoM’s breakeven price of $47/bbl (down from $68 in 2014) keeps it competitive, but prolonged trade friction could dampen investment appetite. Production growth is expected to continue, but smaller firms might pull back if the trade wars escalate, and long-term investment could soften.
Still, the resilience of E&P programs in the US Gulf — as shown by production levels, which have been growing and are expected to continue to climb — suggests adaptation rather than downturn.
