Analysts Fear Trump's Suggested Tariffs on Canada Would Raise Pump Prices
The New York Times Analysts warned on Wednesday that U.S.
President-elect Donald Trump's promise to put tariffs on Canada would disrupt
decades-old oil commerce from its major crude source and raise fuel costs for Americans.
Trump, who assumes office
on January 20, declared this week that he will levy a 25% tariff on all goods
coming from Canada and Mexico until they crack down on illegal immigration and
drug use. According to Reuters, a free-trade agreement would not protect
Canadian oil imports from the taxes.
Even though the United States just became the world's largest producer of oil due to its record-high oil output, more than a fifth of the oil processed by U.S. refiners is imported from Canada.
Pump prices might increase
by 30 cents per gallon or more, or around 10%, based on current pricing in the
landlocked U.S. Midwest, where refineries process 70% of the more than 4
million barrels per day (bpd) of Canadian crude imports, according to GasBuddy
analyst Patrick De Haan.
If the tariffs were put
into effect, refiners like Marathon Petroleum, BP, and Phillips 66 would be
forced to either pay more to import oil from these nations or look for more
expensive, farther-flung suppliers.
According to Commodity
Context analyst Rory Johnston, a percentage of the increased expenses will
probably be transferred to American consumers in the form of higher retail
petrol prices in any case.
"Imposing tariffs on
Canadian oil will inevitably drive up gas prices, considering that a
significant portion of the U.S. refining sector relies on Canadian crude,"
asserted Johnston. The primary element affecting retail gasoline costs is the
price of crude materials. Requests for comments from Phillips 66, Marathon, and
BP went unanswered immediately.
A rare instance of
disagreement between the industry and Trump was revealed when the American
Petroleum Institute and the American Fuel and Petrochemical Manufacturers
organization, America's leading oil trade associations, stated that enforcing
the tariffs would be a mistake.
"Comprehensive trade
regulations that may raise import expenses, limit available supplies of oil
feedstocks and products, or instigate retaliatory duties could adversely affect
consumers and jeopardize our position as the globe's foremost producer of
liquid fuels," AFPM asserted on Tuesday.
During his bid for
reelection, Trump emphasized reducing gasoline costs to attract voters weary of
skyrocketing fuel prices due to the fallout from the coronavirus pandemic,
Russia's incursion into Ukraine, the conflict in Gaza, and various supply
disruptions.
THE MIDWEST WILL BE THE HARDEST
In contrast to the light
grade blasted in the growing U.S. shale oilfields, many of the nation's
refineries are set up to process heavy Canadian crude grades.
Particularly in the
Midwest of the United States, refineries are equipped to process the heavier
crude that is transported by train or pipeline across the border.
According to RBN Energy,
in 2023, BP's Whiting refinery in Indiana, which is the biggest fuel provider
in the Midwest, imported over 250,000 barrels per day of Canadian heavy oil, or
over 57% of its 440,000 barrels per day refining capability.
"If tariffs
jeopardize their procurement of gasoline from the Irving Oil refinery located
in Saint John, New Brunswick, major consumer markets on the U.S. East Coast can
procure seaborne shipments from Europe or Africa," he remarked.
A request for feedback was
not promptly addressed by Irving Oil.
He noted that West Coast
refineries are better equipped to process U.S. oil. "Regions adjacent to
Illinois are the areas that would bear the most impact due to having the fewest
alternatives," De Haan mentioned. Gulf Coast refiners possess some capability
to import additional oil from members of the Organization of the Petroleum
Exporting Countries such as Iraq, Saudi Arabia, Kuwait, and Venezuela,
Commodity Context's Johnston noted. Across the board, numerous refiners are
already encountering significantly reduced margins for fuel production,
adversely affecting their profits in recent quarters. "These potential
tariffs are an affront to refineries,"
