Tariffs on Canadian and Mexican Oil Push Gas Prices Higher
Following President Trump's decision to implement tariffs on Canadian and Mexican oil, analysts predict higher fuel costs for U.S. consumers. These tariffs aim to bolster domestic businesses and address illegal immigration and drug smuggling, but they may counteract promises to curb inflation.
The U.S. relies heavily on oil imports from Canada (4 million barrels per day) and Mexico (450,000 bpd). Tariffs on these imports increase production costs for refined fuels like gasoline, which will likely result in higher prices for consumers.
Energy analysts predict a noticeable rise in fuel prices if oil and refined products remain subject to the tariffs. The longer the tariffs remain in place, the greater the impact on consumer expenses.
The American Fuel and Petrochemical Manufacturers Association urges the removal of tariffs before they significantly impact consumers. Additionally, the 10% tariff on Canadian energy products and the 25% tariff on Mexican imports will disproportionately affect certain regions.
Midwest refiners heavily process heavy and medium crude oil grades produced in Canada, while Gulf Coast refiners may face logistical challenges in sourcing alternative supplies for Mexican crude oil.
Companies involved in wholesale fuel distribution acknowledge the inevitability of passing on increased costs to consumers. Even as post-COVID fuel margins decline, surge demand and reduced supply growth necessitate the adjustment.
East Coast drivers may also experience price increases due to limited refining capacity. The region primarily relies on the Colonial Pipeline from the Gulf Coast, which is often at capacity. Imports from Canada and Europe could supplement supply, but they will incur additional costs.
Ultimately, analysts emphasize that the tariffs will likely lead to higher fuel costs for consumers regardless of location.