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US refining industry concerned protectionism could stunt growth

While the U.S. petroleum refining industry welcomes the latest White House policy shift aimed at regulatory and federal tax reform, it is concerned that an overly-nationalist tone on trade policy could affect the industry's global growth prospects.

"We certainly have a much more hospitable federal government," American Fuel and Petrochemical Manufacturers president and CEO Chet Thompson said March 12. Thompson noted there are approximately 60 regulations at the U.S. Environmental Protection Agency that impact the refining industry that are "being unwound."

"But at the moment, I would say we're concerned about nationalism and protectionism … and concerned about the steel tariffs that could impact our pipeline projects, and [North American Free Trade Agreement] going away," he said.

Speaking on the sidelines of the trade group's 2018 Annual Meeting in New Orleans, Thompson noted that as the domestic growth rate in U.S. petroleum product demand flattens, continued expansion as an industry depends on exports.

"We still think there's still a lot of room for growth," he said. "That's why we're urging the president not to mess around with NAFTA, particularly not the energy chapter of NAFTA, because a third of all of our exports go to Mexico and Canada. … We're supplying more than half of the gasoline in Mexico."

Thompson said the industry fears that the announced steel tariffs could encourage retaliatory tariffs but is also concerned about practicality.

"Where are we going to get the steel [we need]?" Thompson said. "Are these [tariffs] going to stop infrastructure projects we need and want?"

Thompson said the Canadian energy minister has "made it clear" to AFPM that they want NAFTA to remain in place. However, if the trade deal is scuttled, tariffs could be re-imposed on the 4 million barrels per day of Canadian and Mexican crude oil supplying U.S. refiners, and petroleum product flows could change.

"Europe would love to get the Mexican gasoline market," Thompson said. "So what would we do if we price ourselves out of that?"

The U.S. Congress could pass a law blocking the president's push for tariffs, but Thompson said the industry group he leads has not lobbied Congress to take that action.

"I think it's probably a little early to know what the proper role for Congress is right now," he said. "[Trump] has already exempted Mexico and Canada, and he's created mechanisms for some of our other allies to be potentially excluded."

Therefore, the industry will "wait and see," Thompson said. "We're hoping that some of these market signals he's gotten since he started talking about steel tariffs will make sure these mechanisms for exemptions [are] pretty wide.