New York: President-elect Donald Trump’s pledge to impose a 25% tariff on imports from Canada and Mexico could have far-reaching implications for American consumers, particularly at the gas pump. Analysts warn the tariffs would disrupt decades-old oil trade relationships, significantly increasing fuel costs for U.S. drivers.
Canada’s Oil Trade with the US at Risk
Canada, the top crude supplier to the United States, currently accounts for over 20% of the oil processed by U.S. refineries. Many refineries, particularly in the landlocked Midwest, are specifically configured to handle heavy Canadian crude, which cannot easily be replaced by domestic shale oil.
Patrick De Haan, a GasBuddy analyst, predicts pump prices could rise by as much as 30 cents per gallon—approximately 10%—if the tariffs are enacted. “Any tariffs on Canadian oil are going to increase pump prices given the dependence of much of the U.S. refining industry on Canadian crude,” said Rory Johnston, an analyst at Commodity Context.
Impact on Refiners and Consumers
The proposed tariffs would leave refiners like Marathon Petroleum, BP, and Phillips 66 with two costly options: pay the higher price for Canadian crude or import oil from alternative, more expensive sources. In either case, these costs are likely to trickle down to consumers at the pump.
The American Fuel and Petrochemical Manufacturers (AFPM) and the American Petroleum Institute have openly criticized the proposed tariffs, marking a rare moment of discord between Trump and the energy industry. AFPM warned that such policies could “inflate the cost of imports” and harm the U.S.’s competitive advantage as a top producer of liquid fuels.
Midwest Braces for Hardest Hit
Midwestern states are expected to bear the brunt of the price increases. For example, BP’s Whiting refinery in Indiana, which supplies much of the Midwest’s fuel, imported over 250,000 barrels per day of Canadian crude in 2023—more than half of its refining capacity. States near Illinois, with limited access to alternative sources, will likely experience the steepest price hikes.
In contrast, East Coast refineries can turn to seaborne oil imports from Europe or Africa, while West Coast refineries are better positioned to rely on domestic crude. Gulf Coast refiners may increase imports from OPEC countries, including Iraq, Saudi Arabia, and Venezuela.
Also Read | Texas Razor-Wire Barrier Stays, Court Rules Against Biden Administration
Gas Prices in Context
While gas prices have dropped significantly since reaching over $5 per gallon in 2022—averaging $3.04 per gallon as of Monday, the lowest since 2020—the proposed tariffs could reverse this trend. The potential increase comes at a time when refiners are already grappling with narrower profit margins.
“These potential tariffs are a kick in the teeth for refineries,” warned De Haan, highlighting the strain on an industry still recovering from recent disruptions, including the COVID-19 pandemic and geopolitical conflicts.
Also Read | ‘People Will Pay’: Tariffs on Mexican Imports to Spike US Food Prices
A Policy with Broader Implications
Trump’s proposed tariffs aim to pressure Canada and Mexico to address drug trafficking and illegal migration. However, experts caution that such measures could have unintended consequences for U.S. consumers and trade relations, underscoring the complexity of balancing domestic policy goals with economic realities.
