A new report by Deloitte warns that sweeping U.S. tariffs will significantly disrupt operations in the oil and gas industry going into 2026.
Key Takeaways
• The energy sector is heavily dependent on imported materials, drilling rigs, specialized steel, tubing, valves, and other equipment. When tariffs hit these inputs, costs rise.
• According to the report, material and service cost increases could range from 4% to 40%.
• Tariffs in question include: 10-25% on crude feedstocks (outside the United States–Mexico–Canada Agreement), and some tariffs as high as 50% for steel, aluminium, and copper.
• Because of these pressures, companies are now projected to delay final investment decisions (FIDs) and greenfield offshore projects, especially those valued at over USD 50 billion.
Why This Matters
1. Industry impact: Oil & gas firms may see margin compression, slow‐growth prospects, and disrupted supply chains, which could influence energy-sector investment theses.
2. Broader investment flows: Delays in major projects could shift where capital is directed (e.g., toward more stable or domestic-sourced infrastructure, or toward regions less exposed to tariff risk).
Outlook & Strategy for Investors
For investors, these developments highlight the importance of selectivity and active portfolio positioning. Rising input costs and project delays may pressure profitability across parts of the energy sector, particularly in exploration, drilling equipment, and infrastructure construction.
At the same time, this environment can create opportunities for companies with strong balance sheets, efficient domestic supply chains, or diversified revenue sources. Energy majors and service providers with global flexibility may be better placed to navigate higher tariffs and capture long-term demand once projects resume.
From a portfolio perspective, we continue to favor:
• Quality over leverage - focusing on companies with solid cash flow and pricing power.
• Diversification - balancing energy exposure with sectors less sensitive to trade policy risks.
• Active monitoring - staying alert to changes in cost structures, capital expenditure plans, and government policy responses.
In short, while tariffs may introduce short-term volatility, disciplined investors can still find value by emphasizing resilience, quality assets, and a long-term view.
