As President of the US – Donald Trump suggests levying a 10% and 25% tariff on aluminum and steel respectively, there are numerous opinions that are floating around concerning the commitment of the U.S. towards NAFTA. The President, however, recently shared on twitter his interest in reducing the tariff rates for Canada and Mexico if they agree to negotiate a new NAFTA deal. However, experts of the energy industry believe that the interests of all the three countries included in the NAFTA agreement are closely integrated and hence it would be of no benefit to any of the countries if the agreement undergoes changes. As Jackie Forrest, Senior Director of Research at ARC Energy Research stated, “I would expect ongoing free trade for energy. It’s a win-win for all parties.”
Many experts are now concerned about the strain that has been put on the relationship of the U.S. with both Canada and Mexico as a result of talks regarding changes to the NAFTA agreement. The United States currently imports oil from Canada and Mexico and also sells fuel and natural gas to Mexico. Canada is known to be the greatest supplier of foreign oil to the U.S. and deals with the U.S. for buying crude.
In the last decade, there have been significant changes in the outlook of North America. Due to the introduction of hydraulic fracturing and horizontal drilling, the U.S. has now become one of the top producers of Natural Gas in the world and has also become the second-largest oil producer. At the same time, Mexico has been facing a reduction in the output of gas and oil and Canada has also been facing problems regarding potential oil outputs.
However, the NAFTA agreement and the relationship between these three countries have a long history. Mexico has been engaged in continuous advancements to the energy sector and is aiming to bring in private investments in the Mexico region. Mexico has managed to acquire significant amount of funds from companies such as ENI and Talos Energy.
On the other hand, some people believe that the outlook for the energy sector does not seem relatively simple. According to Citigroup Economist Dana Peterson, the energy sector could end up becoming a political ground.
Mexico might end up depending on its own resources for oil and there are high chances of about 60% that there will be changes made to the original NAFTA deal. But the recent developments taking place in Mexico have opened up gates to new opportunities for the three countries and any changes done to the agreement could result in a problematic situation for companies that are invested. Thus, many experts believe that the energy sector will remain free of any such changes and will continue to work as an agent that binds the three countries together in commerce.
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