President Donald Trump's tariffs loom large over the rubber, plastics and manufacturing industries, and experts are watching the market closely for any volatility.
In his second inaugural address, the 47th president said that the U.S. is going to "drill, baby, drill." A significant departure from the Biden administration's focus on establishing green energy and reaching an oil plateau, Trump and new EPA head Lee Zeldin are both long-time supporters of fossil fuels.
Bill Hyde, vice president of olefins and elastomers at Chemical Market Analytics by OPIS, said that the second Trump administration's attitude toward the industry is going to have serious impacts on the petrochemical industry, especially if and when the tariffs take hold.
"There's a lot of really smart people in these oil companies that are trying to answer (the question of), 'If we bring on this next well, is that going to be enough to tip the price down or not,' " Hyde said.
Hyde forecast a relatively stable market for oil, gas energy and synthetic rubber throughout the second Trump administration, but warned that the tariffs on Canada, Mexico and China could cause unforeseen volatility and heavy forecast risks. While stable, the market is much more likely to be uncertain, he said, which can cause major issues throughout the supply chain.
"The fundamental assumption on energy prices is stability," he said. "Well, the forecast is stability, and the fundamental assumption that's driving that base case forecast is that no matter what happens to U.S. production, OPEC+ is going to control the price. They're going to control their production volumes at levels that keep the price about where it is."
But what happens when and if that regulation falls through is where the forecast gets much murkier, Hyde said. He added that he believes that oil companies will be "more cautious than Mr. Trump wants them to be" throughout the tariff rollout process.
Outside of the petrochemical sector itself, Hyde said that he expects "a shift in regulation" going from Biden to Trump. This could include deregulation and disincentivizing of EV usage and carbon emission cutbacks.
"I think we're already seeing EV mandates or tailpipe emission mandates, however you want to couch them, those are going (away)," Hyde said. "I think we'll see some of the tax subsidies on EVs also declining or disappearing."
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