It appears that the three-month grace period granted by US President Donald Trump postponing the implementation of global tariffs until 9 July has once again been extended.
This week, enforcement was pushed further to 1 August, following declarations about raising the tariff ceiling to unprecedented levels. What is striking is that these increases now target countries considered historically loyal to and aligned with the United States. Notably, tariffs on exports from Brazil soared to 50 per cent and those on Canadian goods reached 35 per cent.
More critically, a new list of 20 countries, among them South Korea, Japan, the Philippines, Iraq, and Thailand, has been notified of tariffs ranging from 25 to 40 per cent. Even the European Union was not spared, facing a potential tariff hike to 45 per cent.
From the very moment the White House began imposing these global tariffs on 9 April this year, the world economy entered a period of visible anxiety. This was evident in the sharp declines across all global oil markets. Long-term contracts came to a halt, and spot market transactions for crude oil and liquefied natural gas nearly froze. Within just 48 hours, oil prices plummeted from $72 per barrel to $53. Throughout April, prices fluctuated between $57 and $61 before gradually climbing to $67 following the decision to postpone the tariff implementation until July.
This delay caused a rift in the agreements between OPEC and OPEC+, with some non-aligned nations opting for rapid sales strategies. Meanwhile, the United States began filling its strategic reserves, compensating for the massive federal stockpiles released during the former Biden administration in an effort intended to fracture the OPEC+ alliance in retaliation for Russia’s war on Ukraine. However, the strategy failed to shake oil prices.
China responded by purchasing directly from the spot market, favouring countries outside the OPEC bloc such as Brazil, Angola, Venezuela, and Colombia. India expanded its local storage capacity by importing from Senegal, Equatorial Guinea, and Azerbaijan. Even within OPEC itself, some nations circumvented the bloc’s agreements, increasing supply through shadow fleets on international waters and via backchannel pipelines with neighbouring nations such as Iran, Iraq, and Libya.
These actions led to a decline in demand, tightening long-term contract volumes and triggering renewed calls for OPEC+ meetings to address supply discipline. Prices began to recover slowly, reaching $64 per barrel.
Yet, OPEC’s stability was further tested by Israel’s military incursion into Iranian territory, which lasted nearly two weeks, followed by US strikes. The international oil community braced for a possible Iranian retaliation that might involve closing the Strait of Hormuz, a scenario that would significantly disrupt supply from five OPEC nations bordering the Arabian Sea. This prospect alone pushed prices up to $67 per barrel.
In response, Russia announced a production surge, adding one million barrels per day to the global market throughout the Israel-Iran conflict.
Most recently, during a virtual conference held in Vienna, OPEC and OPEC+ ministers convened and agreed to increase crude output by 600,000 barrels per day. The goal was to regain market loyalty and stabilise prices, particularly to prevent them from reaching levels that would re-enable the US shale industry, which finds production economically unfeasible when prices fall below $76 per barrel.
OPEC’s broader objective is to maintain oil prices around $70 to stimulate industrial economies and prevent a global slowdown in energy demand.
However, the most pressing concern for OPEC and its allies remains: What will be the actual impact on oil prices and market behaviour once the tariffs are enforced on 1 August?
To forecast this, it will be helpful to consider three different possible scenarios.
The first scenario builds on the 20 new countries, such as Japan, South Korea, and Brazil, added to the tariff list and the EU seeing a hike to 50 per cent. The industrial exports of these countries to the US will be directly affected under this scenario, and this may prompt them to reduce their oil imports, leading to a global supply surplus that could reach over three million barrels per day.
Such an oversupply might push oil prices down to $50 per barrel. In that case, China and India would likely respond by purchasing large quantities to build strategic reserves.
In the second scenario, OPEC and OPEC+ during their upcoming meeting in early August could opt for a voluntary production cut exceeding one million barrels per day. This would be an attempt to mitigate rapid price drops and stabilise the market around $60 per barrel.
The third scenario, the most likely, would see a decisive OPEC+ move to cut output by over three million barrels per day. This would halt long-term contracts, drive markets towards immediate spot transactions, and absorb the excess supply, allowing room for negotiations with the White House regarding final tariff percentages on the G7 industrialised countries.
In the light of this, an opportunity arises for oil-importing countries that refine fuel products domestically. Such nations should adopt a different approach amid this volatility by expanding their local oil storage infrastructure, whether underground tanks, surface reservoirs, or covered channels. This would allow them to seize low-price opportunities in August, thereby insulating national budgets from price shocks. Furthermore, they could later sell stored oil during high-price periods and negotiate long-term contracts from a position of strength.
For Egypt specifically, adopting a US federal-style strategic reserve policy is especially prudent. With daily consumption reaching approximately 1.3 million barrels, of which around 550,000 are domestically produced and the rest imported, capitalising on this moment may allow the country to build a buffer stock to meet future needs during price spikes or profit from exports during favourable market conditions.
The writer is a professor of petroleum and energy engineering.
* A version of this article appears in print in the 17 July, 2025 edition of Al-Ahram Weekly
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