US President Donald Trump has announced a 25% tariff on Canadian crude oil, sparking concerns among experts that it could lead to shortages and price hikes in the US. The move comes after Trump spoke to Canadian Prime Minister Justin Trudeau, claiming Ottawa had “misunderstood” the situation.
Canada supplies around 75% of US heavy crude oil imports, with most flows going to refineries like those in Minneapolis, Chicago, and Wood River. These refiners rely on Canadian crude because it is specifically designed for processing.
However, commodity analysts at StandardChartered say that a tariff would lead to strong pass-through to retail prices, making Midwest refineries pay the price. Oil buyers in this region are likely to face higher costs due to the limited substitutability of Canadian crude with other oils.
A study by GasBuddy analyst Patrick De Haan found that consumers could end up paying an additional 10% for gas if the tariffs were passed on. The US imports around 6.6 million barrels per day, with most coming from Canada and Mexico.
The European Union also warned of potential consequences for its own trade relationship with Mexico, which has been strengthened by a new free-trade agreement.
Trump’s move could lead to a surge in oil prices, affecting not only the US but also consumers worldwide.
Source: https://oilprice.com/Energy/Crude-Oil