Global oil market can't underestimate Trump('s) change

摘要

US Republican corporate tax proposal that requires the border tax adjustment (BTA) has played out on the world stage as President Donald Trump suggests a 20 import tax on Mexican goods if its southern neighbor refuses to pay for the cost of building a wall between the two countries. In a note entitled "Destination-based taxation and the oil market," Goldman Sachs analyst Damien Courvalin wrote diat the proposed tax system would indeed help achieve the administration's goals, driving "sharply increased activity" in US shale plays—but at a cost. A possible scenario is that the BTA and the proposed lower corporate rate at 20 would incentivize shale drillers to produce more and sell their oil overseas because there would be no taxes on exports and free expatriation. But the BTA would also incentivize refiners in the US to buy feedstock domestically. Since US crude production (13.5MM b/d) is not sufficient to meet refinery demand (19.6MM b/d), it would give producers in the country the pricing power to charge a sharp premium over international prices—to the point where incentives (for bom producers and refiners) are eliminated. So if the BTA were to be introduced, Goldman said, WTI prices would immediately rise to (assuming the new corporate tax rate of 20) a 25 premium over Brent on US soil though the actual price differential is expected to be much narrower in the international market in order for WTI to be competitive.