Should Natural Gas Companies in Mexico Fear a Trump Presidency?

Internationally, many people are waiting to see how the newly minted President Trump will face the world. Not the least of which include Mexico, who might still be reeling from Trump’s promise to build a wall against immigration and have Mexico pay for it. Can our relationship with the Mexican government recover? If it can’t, then the consequences might be larger than most people expect.

If trade between the U.S. and Mexico tanks because of angry immigration rhetoric and NAFTA fallouts, it’s the natural gas and pipeline supplies from the U.S. who will take the biggest hit.

Ruffling the Feathers of the Gas Industry’s Best Customer

According to a report from the U.S. Energy Information Agency, U.S. exports of natural gas grew in 2016 and have doubled since 2009 — almost all of which is from increasing exports to Mexico. Mexico is America’s best customer — and Trump’s election may look like spit in the glass. While Trump is talking immigration reform, businesses may walk away from the table without a tip.

At present, fracked wells in Texas are sending 4.2 billion cubic feet of natural gas per day to Mexico through pipelines. But these pipelines can carry much more — and if they’re filled, it means more profits for U.S. businesses. In the next three years, new pipelines will double their current capacity of 7.2 billion per cubic feet. Moreover, Mexico is building corresponding networks of pipelines to ensure all that U.S. gas gets carried throughout Mexico.

How Talk of a Wall Affects American Natural Gas Companies

Right now, business is great, but if Trump continues to hit sour notes with the Mexican government, it could damage this relationship. Unfortunately, Trump’s antagonistic attitude may already be causing trouble. As one Mexican governor made clear, the U.S. isn’t the world, and Mexico isn’t dependent on us. The U.S., though, especially the energy industry, does need Mexico. It’s in our interests for Mexico’s economy to grow, and natural gas is helping it.

But that’s not all that could happen. If Trump blocks Mexico, the Mexican government will likely strengthen their growing ties with China — putting a commercial rival much closer than anyone in the U.S. wants. In fact, some in Mexico are even thinking of the break with American industry as an opportunity to look to other world markets, which would mean less U.S. dependency.

The Impact on the U.S. Economy

For Carrier to stay in Indiana, the state had to give $700,000 annually in tax breaks for years to come. And while the fact that the Carrier plant is in Indiana instead of Mexico looks good on paper, that kind of maneuvering is going to be a lot harder to pull off if the VP isn’t from the state in need. Not to mention that, for U.S. industries, opening up shop in Mexico is a pretty sweet deal — in part because of how Trump’s election caused the peso to plunge.

At this point, it’s impossible to know what of Trump’s campaign rhetoric was true and what was simply rhetoric. Whether he understands the implications of burning bridges with Mexico is unclear, but it seems unlikely, as he is only just now learning the complexities of America’s many global relationships.

Let’s just hope that wall he keeps talking about has some pipeline-sized holes at the bottom.

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