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Trump’s 20% Import Tax May Be Another Gift for Canadian Oil

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Evaluation of Public Accountability and Tax Culture among Tax Payers in Nigeria
  • Trump’s 20% Import Tax May Be Another Gift for Canadian Oil

U.S. President Donald Trump’s controversial 20 percent tax on imports from Mexico to pay for a border wall would come as a second gift in less than a week for Canada’s oil patch.

The tax, which White House press secretary Sean Spicer characterized as “theoretical,” would apply to countries “like Mexico,” with which the U.S. has a trade deficit, he said in a briefing Thursday. That would seemingly exempt Canada. The U.S. ran a surplus of $11.9 billion with the northern neighbor in 2015.

This would potentially be a boon for Canadian oil sands producers whose heavy crude competes with Mexican supplies in the U.S. refining market. The proposed tax comes three days after President Trump revived the proposed TransCanada Corp.’s Keystone XL project to build a new crude pipeline from Western Canada to the U.S.

Trump’s proposal “would attract more Canadian crude because it would be cheaper,” Bart Melek, the head of global commodity strategy at TD Securities in Toronto, said by telephone. “It just makes Mexican oil more expensive by 20 percent so it gives Canada a comparative advantage.”

Canada is the biggest foreign supplier of oil to the U.S. and Mexico is the fourth-largest, Energy Department data show. Mexico’s easy waterborne access to the U.S. Gulf Coast refining center means its heavy Mexican Maya crude has sold for roughly 20 percent more than similar Western Canadian Select over the past four years, data compiled by Bloomberg show.

Tense Relations

Spicer’s comments came as relations between the U.S. and its southern neighbors deteriorated after Mexican President Enrique Pena Nieto canceled a planned visit to the U.S. following Trump’s insistence that Mexico pay for a border wall between the two countries.

To be sure, many U.S. refiners get Mexican crude under long-term contracts that can’t simply be canceled. Some contracts may include language that allows them to be reopened if there is a big change in external environment, but how a border tax would affect those contracts isn’t clear, Afolabi Ogunnaike, an analyst at Wood MacKenzie Ltd., said by phone from Houston.

Canada sent 3.24 million barrels a day of oil to the U.S. in October, while Mexico sent 555,000, Energy Department data show.

Other countries might also be affected. Saudi Arabia, the U.S. second-biggest foreign crude supplier, had a trade deficit with the U.S. in 2012 of $31 billion, based on the latest available data provided by the Office of the U.S. Trade Representative.

Western Canadian Select crude priced in Alberta traded at $40.28 a barrel Thursday, while Mexican Maya sold in the U.S. for $46.50 a barrel, data compiled by Bloomberg show.

CEO/Founder Investors King Ltd, a foreign exchange research analyst, contributing author on New York-based Talk Markets and Investing.com, with over a decade experience in the global financial markets.

Crude Oil

COVID-19 Plunges Nigeria’s Oil Revenue by 41% in the First Nine Months of 2020

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COVID-19 Plunges Nigeria’s Oil Revenue by 41% in the First Nine Months of 2020

Nigeria’s oil revenue declined by 41.44 percent in the first nine months of 2020 to $2.033 billion, according to the latest data from the Nigerian National Petroleum Corporation, NNPC.

This represents a decline of 41.44 percent from $3.47 billion filed in the same period of 2019 when there was no COVID-19.

In the September 2020 edition of NNPC’s Monthly Financial and Operations Report (MFOR), revenue from oil and gas rose by 16 percent to $120.49 million in the month of September, a 66 percent or $234.81 million drop from $355.3 million posted in the same month of 2019.

The global lockdowns caused by the COVID-19 pandemic plunged Nigeria’s crude oil sales and global demand for the commodity. This was further compounded by Nigeria’s high cost of production compared to Saudi Arabia, Russia and others that were offering discounts to boost sales during one of the most challenging periods in human history.

Experts like Prof. Yinka Omorogbe, President of Nigeria Association of Energy Economics, NAEE, were not surprised with the drop in earnings given the effect of COVID-19 on the world’s economy.

She, however, called for the revamp of the nation’s petroleum sector laws and diversification of the economy away from oil revenue dependence. She said “Covid-19 made 2020 a very hot year and it battered the oil industry internationally and we are not an exception; so we could not have been unaffected”.

She also said the effect of the fall “is definitely a wake-up call; we have to diversify, strengthen our other resources and capabilities”.

Omorogbe, a former NNPC Board Secretary, urged the government and the operators in the sector to look inward and think strategically, stating: “think medium term, think of where they want to be and the government, above all, must think of how best we can utilize our resources, so that we can achieve our objectives once we know and define them.

“It is a clear wake-up call, if not we will just sit here and find that we have become one of the poorest nations in the world”, she noted.

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Commodities

Crude Oil, Other Commodities Closing Price for Monday

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Crude oil

Crude Oil, Other Commodities Closing Price for Monday

Brent crude oil, Nigeria’s crude oil benchmark, gained 47 cents to $55.88 per barrel on Monday, while the US crude oil expanded by 50 cents to $52.77 per barrel.

Gold for February delivery fell $1 to $1,855.20 an ounce. Silver for March delivery fell 7 cents to $25.48 an ounce and March copper was little changed at $3.63 a pound.

The dollar fell to 103.80 Japanese yen from 103.83 yen. The euro fell to $1.2139 from $1.2167.

Wholesale gasoline for February delivery rose 1 cent to $1.56 a gallon. February heating oil rose 2 cents to $1.59 a gallon. February natural gas rose 16 cents to $2.60 per 1,000 cubic feet.

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Gold

Gold Gained Ahead of Joe Biden Inauguration 2021

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Gold

Gold Gained Ahead of Joe Biden Inauguration 2021

Gold price rose from one and a half month low on Tuesday ahead of President-elect Joe Biden’s inauguration on Wednesday.

The precious metal, largely regarded as a haven asset by investors, edged up by 0.2 percent to $1,844.52 per ounce on Tuesday, up from $1,802.61 on Monday.

According to Michael McCarthy, the Chief Market Strategies, CMC Markets, the surged in gold price is a result of the projected drop in dollar value or uncertainty.

He said, “The key factor appears to be the (U.S.) currency.”

As expected, a change in administration comes with the change in economic policies, especially taking into consideration the peculiarities of the present situation. In fact, even though Biden, Janet Yellen and the rest of the new cabinet are expected to go all out on additional stimulus with the support of Democrats controlled Houses, economic uncertainties with rising COVID-19 cases and slow vaccine distribution remained a huge concern.

Also, the effectiveness of the vaccines can not be ascertained until wider rollout.

Still, which policy would be halted or sustained by the incoming administration remained a concern that has forced many investors to once again flee other assets for Gold ahead of tomorrow’s inauguration.

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