Tariffs in the pipeline: Energy services firms set to use pricing, sourcing responses

The supply chains behind the production of oil and natural gas have nominally had a boost from the policies of the Trump administration.

However, the energy equipment and services firms have indicated that imposition of wide-ranging tariffs under the reciprocal program and the removal of exemptions to steel and aluminum Section 232 tariffs will increase costs to deliver new and existing energy projects.

The earnings conference calls held by the big energy equipment and services firms have shown their tariff exposure and strategies to deal with them.

One firm indicated that it faces tariff costs “primarily from imports of raw material into the US in our Production Systems division.” Similarly, a second company noted tariffs are covering “parts like collars for drilling and gun bodies for perforating business” while a third flagged specifically that the “big impact for drilling contractors is on drill pipe.”

Oil country tubular goods (OCTG) are particularly exposed to tariffs given as much as a half of domestic supplies come from imports.

US imports of pipes used in the oil and gas sector have a wide variety of sources depending on the gauge and precise use case, with shipments led by imports from South Korea by mass with 34.8% of all types by mass in 2024, followed by the EU as a whole (led by Austria), Canada and Taiwan.

As a result, tariffs could range from the basic 25% under the Section 232 steel duties to 50.0% for non-USMCA compliant products.

Aside from direct tariffs, one firm has noted that “tariff uncertainty at the start of the year resulted in customers delaying discretionary spending.” Another firm stated that tariffs “will very likely cause demand destruction in the shorter term.”

It’s not just US operations that may be affected, with firms highlighting risks to “exports from the US subject to retaliatory tariffs.” That’s likely a reference to duties being applied by mainland China and Canada as well as future risks if trade deals aren’t reached with other countries and “reciprocal” tariffs increase from July.

In terms of routes to offsetting tariffs, one company indicated it is “actively engaging with customers to recover tariff-induced cost increases through contractual adjustments.” There may be limits to using price increases, with another noting that project expenses “ramps up fairly dramatically even if we are able to pass on the cost fully to customers with some of the tariff levels that we've got right now.”

Prices of OCTG used in oil and gas drilling projects in the US increased by 6.8% in the first quarter of 2025 and are expected to rise by a further 7.0% in the second quarter as a result of tariff increases and increases in feedstock for electric resistance welded products (ERW), according to S&P Global Market Intelligence estimates.

The recent increase follows an extended downturn that saw prices drop by an average of 10.3% per quarter between the first quarter of 2023 and the third quarter of 2024. Looking further ahead, hot-rolled coil prices are peaking and are expected to ease the upward pressure on prices for tariffs later in the year.

Additional sourcing tactics are also available, with one firm having “gotten well ahead of drill pipe needs in bulk purchases” as well as finding “alternate domestic supply sources” for some consumables. Similarly, another is “exploring domestic procurement alternatives to reduce input costs” and a third has stated it is “trying to cultivate where we feel like we need alternative suppliers.”

While there is room for domestic producers to increase output of OCTG, the supply base has consolidated since 2020 and mills could keep output at current levels to support prices over increased volumes.

This article was published by S&P Global Market Intelligence and not by S&P Global Ratings, which is a separately managed division of S&P Global.