By Shariq Khan and Nicole Jao
NEW YORK (Reuters) – Newly-elected U.S. President Donald Trump’s pledge to impose tariffs on Canada would drive up fuel prices for Americans as it upends the decades-old oil business of its top crude supplier, they said analysts Wednesday.
Trump, who takes office on January 20, said this week he would impose a 25% tariff on all imports from Canada and Mexico until they control drugs and migrants crossing the border. Canadian oil imports would not be exempt from the duties under a free trade agreement, Reuters reported.
Even as rising oil production to record highs has made the U.S. the world’s largest producer in recent years, more than a fifth of the oil processed by U.S. refineries is imported from Canada.
In the landlocked US Midwest, where refineries process 70% of the more than 4 million barrels per day (bpd) of Canadian crude imports, consumers could see pump prices rise by 30 cents per gallon or more, or about 10%, based on the current situation. prices, says GasBuddy analyst Patrick De Haan.
If implemented, the tariffs would force these refiners, including Marathon Petroleum, BP and Phillips 66, to either pay a higher price to import oil from these countries or to find alternative suppliers that would be further away and therefore more expensive.
Under either scenario, some of the additional costs will likely be passed on to U.S. consumers in the form of higher gasoline prices at retail pumps, said Commodity Context analyst Rory Johnston.
“Any tariff on Canadian oil will increase pump prices, given the dependence of much of the U.S. refining industry on Canadian crude,” Johnston said. The cost of raw materials makes up the largest component of gasoline prices.
BP, Marathon and Phillips 66 did not immediately respond to requests for comment.
The main U.S. oil trade groups, the American Fuel and Petrochemical Manufacturers Group and the American Petroleum Institute, meanwhile said imposing the tariffs would be a mistake, exposing a rare moment of disagreement between the industry and Trump.
“Across-the-board trade policies that could raise the cost of imports, reduce accessible supplies of oil commodities and products, or trigger retaliatory tariffs have the potential to impact consumers and undermine our lead as the world’s largest producer of liquid fuels,” said AFPM. on Tuesday.
Cheaper gasoline was among Trump’s top priorities during his re-election campaign, as he tried to connect with consumers frustrated by skyrocketing fuel prices in the wake of the coronavirus pandemic, Russia’s invasion of Ukraine, the war in Gaza and other supply disruptions .
