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Border adjustment tax scheme would hit US oil refiners

Friday, February 3, 2017

Significance

Congressional Republicans are mulling the introduction of a border adjustment tax (BAT) regime as part of an overhaul of the US tax system. For the oil industry, the reform would have far-reaching consequences for company finances, the ways US oil flows through international markets and how much consumers pay at the pump.

Impacts

  • More US oil exports would require new infrastructure, creating opportunities for pipeline and port terminal builders.
  • Higher domestic gasoline and diesel prices could push consumers to more fuel-efficient hybrid or electric vehicles.
  • However, higher gasoline prices would probably also hit consumer spending in other parts of the US economy.
  • Russian refiners -- the largest sellers of finished oil products into the US market -- would suffer from an import tax scheme.
  • Canadian oil producers could gain US market share if a border tax is placed only on Mexican goods, WTO issues notwithstanding.

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