Report outlines energy stakes of global trade battles
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The difference between trade wars and trade peace (or something close) could sway global oil demand by millions of barrels per day this decade, the research firm Wood Mackenzie finds.
Why it matters: Its oil estimates are part of a wider report that shows how trade policy is a powerful variable that will shape the energy future.
- Under its scenarios, 2030 demand would be 2.5 million barrels a day lower in a trade war compared to a low-tariffs case.
- Price differences are also quite large between the competing cases.
How it works: Woodmac models three tariffs and economic growth cases and their effects on oil, gas, power and metals.
- A "trade truce" that sees global trade barriers quickly revert back to 2024 levels.
- "Trade tensions" — the most likely — in which barriers rise but "all-out" war is avoided. Average U.S. import tariffs would be 10% in 2026-2030 vs. 2.3% last year.
- "Trade war," which means the U.S. goes ahead with President Trump's April 2 threats and things go south, bigly. Global GDP would be roughly 3% lower in 2030.
Driving the news: Woodmac sees demand rising this decade no matter what, but the amount is highly dependent on trade policies' economic fallout.
- In "truce," demand would rise 4.4 million barrels per day from 2024-2030, reaching 108 mbd, with prices healthy enough to spur growth in the U.S. and elsewhere.
- "Tensions" still brings growth, albeit slower. "War" would bring a steep decline next year before some recovery, and then growth slowly would resume before going into another late-decade decline.
The big picture: The stakes are high for other commodities, too, and U.S. companies are vulnerable.
- The "war" scenario "hits LNG demand" hard. What was already projected to be something of a supply glut from 2027 onward would get even more pronounced.
- This would squeeze the margins for U.S. LNG exporters because domestic gas prices remain "resilient."
- But trade negotiations could provide tailwinds for LNG — Woodmac points out that Trump likes to use U.S. LNG as a bargaining chip.
The intrigue: Power markets are especially tough to game out as downward demand pressure from slower growth mixes with updrafts from data centers and more.
- But Woodmac sees U.S. battery storage "hardest hit among the generation technologies" in the "war" case, given China's supply chain dominance.
- More broadly, Woodmac calls trade tensions an obstacle to global climate efforts. Tough economic times can reduce governments' financial support, and countries also prioritize energy security.
Yes, but: The nexus between trade friction, climate and clean energy is really complicated.
- Veteran Carlyle analyst Jeff Currie's recent paper argues that in a splintering world, nations will prioritize fuels that aren't traded on global markets. That boosts renewables.
The bottom line: "Even if an all-out trade war is averted, the impacts of higher tariffs on economic growth, energy demand and production costs will be complex and far-reaching," Woodmac states.
