Tariffs on Oil and Gas: Trump’s Latest Move

Impending Tariffs on Oil and Gas

U.S. President Donald Trump announced on Friday that his administration plans to impose tariffs related to oil and gas around February 18. This move could potentially reduce the planned levy on some Canadian crude, according to Trump.

The Impact on U.S. Oil Refiners

The U.S. imports approximately 4 million barrels per day of oil from Canada, with roughly 70% of this oil being processed by refiners in the U.S. Midwest. A tariff on oil imports could lead to lower production of fuel at these facilities and drive up costs for consumers, as warned by analysts and companies.

Trump’s Statement

During a press conference in the White House’s Oval Office, Trump stated, “We’re going to put tariffs on oil and gas. That’ll happen fairly soon, I think around the 18th of February.” When asked if the tariffs would include Canadian crude, Trump replied, “I’m probably going to reduce the tariff a little bit on that. We think we’re going to bring it down to 10% for the oil.” This would be a reduction from the previously discussed 25% tariff.

Canadian Crude and U.S. Refiners

Many U.S. oil refiners, particularly in the Midwest, rely on imported crude because their facilities are configured to run heavier crude grades, such as those from Mexico and Canada. They are awaiting clarity while preparing for the new tariffs on Canadian and Mexican crude imports. Earlier this month, imports of crude from Canada to the United States hit record levels.

Industry Reactions

U.S. refiner Phillips 66 expects production cuts in the Midwest and Rocky Mountain region where alternative crude supplies are limited if tariffs take effect. Phillips 66, along with HF Sinclair and Par Pacific Holdings, have elevated exposure to Canadian crude, according to data from TD Cowen.

Valero, the second-largest U.S. refiner by capacity, is also preparing for the tariffs. Gary Simmons, chief operating officer of Valero, stated during a call with analysts, “Our commercial and optimization teams have been working hard to develop every possible scenario we can think of and how we would respond” to Trump’s tariffs.

Conclusion

The impending tariffs on oil and gas could have significant implications for the U.S. oil refining industry, particularly for those relying on imported crude from Canada and Mexico. While the exact details of the tariffs are still unclear, it is evident that the industry is bracing for the impact.

FAQs

* When are the tariffs expected to take effect? February 18.
* Which countries will be affected by the tariffs? Canada and Mexico.
* What is the current tariff rate on Canadian crude? 25%.
* What is the proposed tariff rate on Canadian crude? 10%.
* How will the tariffs affect U.S. oil refiners? Production cuts and increased costs for consumers.