The chemical industry’s top lobbyist in Washington said his industry has the ill-fated honor of being one of two most affected by China’s retaliatory tariffs.
“It’s agriculture and the chemical sector that have probably been the two sectors of our economy that have been the most adversely impacted by the retaliatory tariffs,” Cal Dooley, president and CEO of the American Chemistry Council, said in an exclusive interview with the Washington Examiner.
Dooley, 65, is serving his last year in Washington, where he has been the voice of the industry for over a decade, representing such giants as DuPont, Dow Chemical, BP, Chevron, and Exxon.
Dooley isn’t opposed to the Trump administration challenging China’s unfair trade policies, but the way the president has done it has been a “source of frustration.”
“It’s clear that China is unduly subsidizing their state-owned enterprise that are creating market distortions,” Dooley explained. “We don’t disagree with this. But what we do have concerns with is when the president and the administration take a unilateral approach to try to change China’s behavior.”
The result has been “retaliation against the most competitive sectors in the U.S. economy,” he said.
The petrochemical industry has invested billions of dollars in the United States to take advantage of cheap oil and natural gas from the shale boom to feed its plastics and polymer businesses.
“We’re onshoring capital. We’re onshoring jobs. No other sector is even close in terms of the level of investment that we’re creating,” Dooley said.
Petroleum products such as polyethylene are found in many things consumers buy, from shampoo bottles to iPhones. They’re also among the first products the Chinese targeted with countertariffs after the U.S. imposed tariffs on billions of dollars of goods from China.
Trump’s trade policy is costing the industry something to the tune of tens of billions of dollars in trade, Dooley said. Industry projections from a few years ago had the sector’s trade surplus expanding to $75 billion in five years compared to the current $37 billion trade balance. Now the projections have fallen to about $60 billion due to “uncertainty.”
“This is the trade surplus we would be generating if we weren’t subject to these retaliatory tariffs,” he explained.
Nevertheless, there may be a silver lining amid the trade troubles.
Previously, the industry opposed Trump’s desire to increase exports of natural gas, fearing they could lose their competitive advantage if exports increased. The chemical industry relies on cheap, plentiful supplies of natural gas to keep its U.S. operations humming with a readily available feedstock.
Now, Dooley said, his industry is all for increasing exports. He believes there is enough supply to go around for everyone.
What changed was the huge projections for U.S. reserves. Federal data shows that the U.S.’s reserves of oil and natural gas have outpaced most other countries’, making the nation the world’s largest energy producer.
“Almost all companies in our membership now recognize there is such significant reserves of natural gas in the U.S. that we’re going to maintain our global competitive advantage that we’ve secured over the last 10 years because of the advancements in hydraulic fracturing,” Dooley said.
There has also been the realization that with increased exports comes more natural gas development, especially the production of key chemical liquids, such as ethane, that are highly sought after by the industry, Dooley added. Even in the big Texas oil-producing regions, a lot of natural gas and liquids are being produced as byproducts of oil drilling.
“You can strip out the liquids and still have the LNG that can be used for power generation or used for exports,” he said.
Dooley, a former seven-term Democratic congressman, supports the Trump administration’s move to address how state regulators wield their environmental permitting authority.
“There is a case to be made that states have inappropriately used their authority” due to “political pressures” to block pipelines and fossil fuel development, he said. “That is an issue.”
But it’s also important for the private sector to step up and begin sending the right investment signals. Dooley said he would like to see construction of a natural gas liquid storage hub in the shale states of Ohio, Pennsylvania, and West Virginia.
Oil giant Shell is already in the early stages of building a $6 billion natural gas refinery facility in the Appalachian region. This first facility would be a good start, but another facility is what the region really needs to begin attracting investment, according to Dooley, who said a hub would bring a projected $36 billion increase in gross domestic product.
The Thailand-based company PTT has been in discussions with local officials on building a facility near the Ohio border.
“It would be great to see one other big announcement that would accelerate the flow of private sector dollars,” Dooley said. Right now, it is a “chicken-and-the-egg situation.”
Dooley will be replaced in October by Christopher Jahn, the president and CEO of The Fertilizer Institute. Dooley announced his retirement in April 2018.
