America’s energy sector has been growing by leaps and bounds. This is evident from the fact that oil price has been on the rise and production remains robust. Further, experts are of the view that China’s tariffs on its natural gas imports from the United States will end up harming the Asian giant more.
Moreover, energy production in the United States is expected to breach new records in the third quarter. Under such encouraging conditions, investing in mutual funds having significant exposure to energy companies seems prudent.
China to Lose More Because of Its Tariffs
On Sep 21, China imposed 10% tariff on its natural gas imports from the United States in a bid to hurt the U.S. energy sector. This came right after the Trump administration slapped tariffs of 10% on an additional $200 billion worth of Chinese goods.
On the face of it, the tariffs might look to disrupt growth of the U.S. energy sector. However, as the current 10% level will be increased to 25% from Jan 1, 2019, it will encourage companies in the United States to look for alternatives. Further, America does not export much to China because of the huge U.S.-China trade deficit.
Consequently, China stands to lose if it chooses to impose retaliatory tariffs on goods sourced from the United States. Further, economists opine that these tariffs could also cost the Asian giant about 0.6% of its GDP.
America’s Energy Production to Touch New Highs in Q3
Per the latest report by the American Petroleum Institute on Sep 24, outlook for the U.S. energy industry seems rosy for the third quarter of this year. The report debunks claims that the U.S. energy sector is likely to be hurt by trade war woes. It throws light on a very important fact that the country’s overall petroleum trade balance increased an impressive 56% in the last two months. The metric surged to 4.54 million barrels per day (MBD) in August from 2.9 MBD in June.
However, such events are unlikely to affect growth. Petroleum demand in the United States surged to 20.8 million barrels per day over the past month. This was its strongest demand for any specific month since August 2007 and was driven primarily by motor gasoline, distillate and refinery feedstocks. Additionally, gasoline demand in the country increased to its highest level last month since 1945.
