Goldman Sachs: A potential US border-adjusted tax could send WTI to $ 65

Goldman Sachs’ chief commodity strategist Jeff Currie said at the Platts Crude Oil Summit in London on Wednesday, he sees the price of West Texas Intermediate (WTI) crude oil rising sharply by around 30%, when compared to oil elsewhere, on a potential border-adjusted tax in the US.

Key Quotes:

”If they did a border-adjustment tax, it would blow out WTI” 

“WTI would trade somewhere around $15 above Brent, which is why it would be really difficult to pass it. Because essentially, all else equal, U.S. oil prices would pop and that turns into a pop in the U.S. gasoline prices”

“If you talk to Congress, they are very aware of this" 

“The goal of the border-adjusted tax is to create a 25% strength in the U.S. dollar. The view is that for everything non-commodity, the dollar does all the work so that the consumer — in let’s say Detroit or the Midwest in the United States — doesn’t pay the price. The difference is that oil is dollar-denominated all around the world, so it doesn’t have that leverage”

“The benefit is that it will create jobs and expand the U.S. oil industry. If you suddenly have $65 oil in the U.S., but $50 oil in Brent you’d see an enormous amount of resources coming into the U.S.”