Tariffs And Oil Impact: Short Term Pain, Long Term Gain

The Trump administration has global markets shaking with fear of a trade war impact. Donald Trump imposes 25% tariffs on most goods from the neighboring countries Canada and Mexico and hitting China with an additional 10% on goods.

Canadian energy imports get a 10% tariff, while lower than other goods the 10% tariffs could impact refining margins and raise cost for the manufacturers and the end consumers in the end.

President Trump announced on the Truth Social platform his primary duties as President is to keep Americans protected against the threat of illegal aliens and deadly drugs like fentanyl.

The Canadian Prime Minister Justin Trudeau went on television Saturday to address the issues around the tariffs, and the Prime Minister said the trade war would raise prices and cost American jobs. Trudeau said Canada would counter US tariffs with 25% tariffs against $155 billion on American goods.

Energy Tariffs:

The US imports more than 4 million bpd of crude oil from Canada, and most of that crude travels to Padd 2 in the Midcontinent region. The proximity to Canada provides the region access to cheap WCS crude oil, which is a heavy sour blend of crude.

Padd 2 refineries rely on Canadian heavy-sour crude as crude feedstock, with little to no comparable grades’ alternatives. A fear for refining margins looms as pressure with higher priced light grades versus cheaper heavier crude could put dent in margins.

90% of Canadian crude goes to the US and Canada has a limited alternative market for its crude. The Trans Mountain pipeline expansion boosted transport from the country’s oil sands to the Pacific Coast from 300 kbpd to 890 kbpd.

If US refiners increase throughputs of domestic crude, this would effect the US export to Europe, where WTI has been a part of the Brent basket of crude since 2023.

Analysts fear an immediate spike in US gasoline prices between 30-70 per gallon. Higher potential prices don’t seem to deter Trump. “We may have short term some little pain, and people understand that. But long term, the United States has been ripped off by virtually every country in the world,” the US President said on television.

Update: the tariffs have been postponed by 30 days