New congressional policy could stifle oil recovery

Jan 17, 2017

Credit HITCHHACKING / Flickr Creative Commons

When OPEC curbed production last year, oil producers on the High Plains saw a potential end to the slump that has crippled small-town communities in the Texas and Oklahoma Panhandles.

But now, as CNBC reports, a new tax proposal by congressional Republicans could end up being bad news for oil prices. Congress will soon begin debating a plan that would impose a new tax on all imports.

As a side effect of that plan, the U.S. could see the value of the dollar surge. And a stronger dollar could mean bad news for the energy sector. A higher dollar hurts economies in emerging markets. And the developing world is the only new area of growth for the oil industry.

When emerging economies struggle, that can send crude prices higher, ultimately affecting oil economies in the U.S.

Francisco Blanch is the head of global commodities at Bank of America Merrill Lynch. He says he thinks the incoming presidency could accidentally damage the economic tissue of struggling markets. “Emerging markets are very frail,” he said.