On November 28, according to the Financial Associated Press (Editor Liu Rui), American Eastern Time on Monday, President-elect Trump threatened to impose a 25% tariff on all imported products from Mexico and Canada. This threat not only caused a significant decline in the stock prices of American car companies but also raised concerns in the US oil industry.

Multiple organizations in the US oil industry warned that Trump's tariff plan would increase rbob gasoline prices and refining costs in the USA, thereby raising rbob gasoline prices and increasing the burden on consumers.

In addition, some analysts believe that the US refining industry is heavily dependent on crude oil product imports, making it unlikely for Trump to impose tariffs on imported crude oil products.

US refineries heavily rely on crude oil product imports.

GasBuddy oil analyst Patrick De Haan stated that if Trump truly fulfills his tariff promise, the additional costs caused by tariffs would lead to an increase of 50 cents per gallon in rbob gasoline prices in the midwest region of the USA during the peak driving season next summer.

During Trump’s campaign as President-elect, he promised to reduce domestic energy costs and lower rbob gasoline prices to below $2 per gallon. However, his current tariff plan seems to be contrary to that.

"The situation is not optimistic," De Haan said. "This is actually contrary to Trump's stance on deregulation in the oil industry and is very negative news for refiners."

Although the usa itself is also a major oil-producing country, a large portion of its domestic oil production is light, low-sulfur crude, whereas the country's refineries primarily require heavy, sulfur-containing crude oil for producing gasoline and diesel. Therefore, despite the usa's oil production soaring to record levels, the country still needs to import crude oil.

Data shows that out of every 10 barrels of oil imported by the usa, 7 barrels come from Canada and Mexico, most of which flow to fuel manufacturers in the usa Midwest, with some going to large refining centers along the Gulf Coast.

More than one-fifth of the crude processed by usa refineries is imported from Canada. Last year, fuel manufacturers in the usa imported 6.5 million barrels of oil daily, equivalent to the combined production of Iraq and Kuwait.

Trump's tariff threat will rekindle market concerns about inflation and could deal a heavy blow to usa fuel manufacturers.

The usa oil trade organization issued a serious warning.

Scott Lauermann, spokesperson for the usa oil industry's largest trade organization, the American Petroleum Institute, stated:

"Canada and Mexico are our largest energy trading partners. Maintaining the free flow of energy products across our borders is crucial for North American energy security and for usa consumers."

Another major oil trade organization, the American Fuel and Petrochemical Manufacturers, stated:

“Comprehensive trade policies may raise import costs, reduce the supply of crude oil products, or trigger retaliatory tariffs, potentially impacting consumers and undermining our advantage as the world's leading liquid fuel manufacturer.”

Currently, the largest buyers of crude oil from Canada and Mexico include bp plc, exxon mobil, and usa's largest refiner marathon oil. In addition, Pemex and Motiva, a subsidiary of Saudi Aramco, are also on the buyers' list, both of which own refineries in Texas.

Commodity Context Analyst Rory Johnston stated that once the tariff plan is truly implemented, these tariffs will force the aforementioned refining giants to either pay higher prices to import oil from these countries or seek further, more costly alternative suppliers. In either case, part of the increased costs may be passed on to usa consumers in the form of higher retail gasoline prices.

Johnston stated: “Given that the usa refining industry largely relies on Canadian crude oil, imposing any tariffs on Canadian crude oil will drive up oil prices.”

Will Trump's tariff plan not materialize?

Bob McNally, president of Rapidan Energy Group and former advisor in the Bush administration, indicated that about 75% of the crude oil for midwestern usa refineries comes from Canada, and these refineries will be most affected if Trump follows through on his threats.

McNally stated in an interview: “Canada and the region's refineries are inseparable, with hardly any other options.” He believes that the likelihood of Trump actually implementing the tariff plan he announced this week for the oil industry is only 25%.

David Oxley, a commodity economist at Capital Economics, also stated that the probability of the usa imposing tariffs on imported crude oil is low. However, if it does occur, it "could lead to a decline in oil production from Canada and Mexico, an increase in usa gasoline prices, and may tighten the global oil market in the medium term."

Editor/ping