Big Oil could be in a unique position to protect its interests against a Republican proposal to tax imports, given that President-elect Donald Trump’s cabinet is studded with oil champions sensitive to the risk of higher gasoline prices.
As Reuters reports, Trump’s emerging leadership includes ExxonMobil Corp. CEO Rex Tillerson as secretary of state, former Texas Gov. Rick Perry as energy secretary and Oklahoma Attorney General Scott Pruitt as Environmental Protection Agency administrator.
Trump himself has made no secret of his support for the energy sector. And in Congress, both Republicans and Democrats have close industry ties, including House tax panel chairman Kevin Brady, a Texas Republican.
House Republicans want to adopt a sweeping tax reform that would sharply reduce tax rates for corporations and end the taxation of U.S. corporate overseas profits.
But a provision known as border adjustability is stirring up controversy. Though intended to boost U.S. manufacturing by exempting export revenues from tax, the provision worries some industries because it would also tax imports.
Because U.S. oil refiners import about half the crude oil they use to make gasoline, diesel and other products, analysts say the change could lead to higher gasoline prices and potentially undermine economic growth.
Integrated oil companies such as Exxon, Chevron, BP, Royal Dutch Shell and ConocoPhillips could also be hit, depending on whether they are net importers. But the industry’s allies would likely move to soften any rough edges, analysts say.
