Tariffs are a hidden energy policy – difficult to predict and hitting the oil and gas industry in unexpected ways.
Public debate on US energy policy is typically focused on fuel choices: oil, gas or renewables. Yet, it’s not just the fuel choice that matters. Too little attention is paid to the infrastructure that moves, processes and stores energy.
Pipelines, wiring, pump stations, tank farms, compressor stations and storage facilities form the backbone of our energy system. Infrastructure projects are capital‑intensive and require years of planning, engineering and permitting. They also depend on a complex global supply chain that delivers high‑grade steels, copper wiring, precision valves, control systems and compressor drives that are often sourced from Europe, Asia or Canada.
Many of these components have no practical domestic substitute. Until US manufacturing capacity catches up, America must continue to import them and absorb the higher costs when tariffs are imposed or changed.
Volatile Tariffs and Supply Chain Shock
The Trump administration’s tariff policies – from steel and aluminum duties that have jumped from 25 to 50 percent under Section 232 to reciprocal tariffs that have been applied globally and challenged legally – have introduced significant volatility into energy supply chains.
Each new announcement or retaliation sends shockwaves through procurement channels. Contractors report they can no longer lock in prices for more than a few weeks. Some vendors will not even quote prices without a signed purchase order, forcing developers to choose between committing capital years early or risking major cost escalation.
This environment is forcing oil and gas producers to delay or reconfigure projects simply because they cannot accurately forecast costs. Tariffs are no longer seen as a one‑time adjustment but as an ongoing risk factor that must be built into financial models and contingency budgets. For projects already facing long lead times, this uncertainty erodes confidence and deters investment.
The effect on project economics is dramatic. Tariff rates that continue to jump unpredictably can add hundreds of dollars per ton to critical materials. These shocks ripple across the supply chain, lengthening lead times and slowing development. The result is fewer projects reaching a final investment decision and a slower build‑out of the infrastructure needed to support US energy growth.
Planning to Mitigate Investment Risk
Energy infrastructure projects typically fix budgets years in advance based on detailed engineering estimates. Even small swings in input costs can turn a project that looked profitable into one that fails to meet required returns. With tariffs shifting frequently, project sponsors must revisit cost assumptions again and again. This creates uncertainty for boards, investors and lenders who need predictability before committing capital.
Contractors, facing the same volatility, are shortening the window for holding bids open and are increasingly including escalation clauses to protect themselves. This makes it harder for project developers to maintain cost certainty. For a business built on long‑term planning, such unpredictability increases the cost of capital and forces many projects to the sidelines. These delays not only stall energy production but also postpone jobs, tax revenue and related economic activity in local communities.
Policy Recommendations to Achieve Tariff Stability
Tariff stability is critical if the US wants to maintain its energy momentum. Investors must have confidence that a project’s economics will not be overturned by a sudden policy shift. Fortunately, there are ways to achieve stability without abandoning the administration’s trade objectives.
- A fair, transparent and timely exclusion process: Industries that can demonstrate legitimate hardship or a lack of domestic supply should have a clear, efficient path to relief. A regularized process for exempting critical infrastructure inputs would let projects proceed without unpredictable cost shocks. Exclusions can be narrowly targeted to ensure they do not undermine broader trade goals.
- Structured engagement to encourage domestic investment: The administration should establish a standing public‑private council to identify which energy infrastructure components could realistically be produced domestically and over what timeline. Companies ready to invest in US manufacturing capacity should be given predictability on tariff treatment, so they can make long‑term commitments with confidence.
Together, these steps would bring much‑needed stability to the market, aligning trade policy with energy policy. A stable tariff regime would allow developers to plan projects, investors to commit capital and manufacturers to make rational decisions about where to locate production. Without such stability, capital expenditures will remain constrained, projects will be delayed, and the benefits of America’s energy abundance will be left on the table.
Energy investors, project developers and policymakers share a common goal: building the infrastructure needed to maintain US energy security and economic strength. Without predictable tariff policy, billions of dollars in potential investment will remain sidelined, weakening America’s competitive position.
The administration should act now to stabilize tariffs, implement a fair exclusion process and bring industry stakeholders together to plan future domestic capacity. Certainty in trade policy will unlock the next wave of pipelines, LNG terminals and storage facilities that keep US energy affordable, reliable and globally competitive.
