Goldman Sachs has warned that Trump’s tariffs on Canadian goods could hurt US consumers significantly.
Reuters reported on Tuesday that Trump’s proposed 25% tariffs on Canadian and Mexican imports would include crude oil.
US refineries import a hefty amount of crude oil products from Canada.
According to the US Energy Information Administration, crude oil imports in the week ended November 15 stood at 3.86 million barrels per day from Canada.
Similarly, during the same week, imports from Mexico were at 768,000 barrels per day.
According to the US Department of Energy, this makes up about 25% of the crude oil supply in the country.
The oil industry has raised concerns that the proposed tariffs could hurt US consumers, the energy sector, and even national security, according to Reuters.
According to a Reuters report, many refineries in the US are configured specifically to process crude from Mexico and Canada. The proposed tariffs could affect these refineries significantly.
Tariffs to increase local fuel prices
US consumers remain very sensitive about gasoline prices in the country.
Daan Struyven, head of commodities research at Goldman Sachs, noted that a 25% tariff on Canadian imports would likely drive up fuel prices in the US.
According to Struyven, the increase in tariffs could potentially have an impact on three groups, US consumers, refiners, and Canadian oil producers.
Struyven, however, was skeptical about the likelihood of such tariffs, given Trump’s focus on keeping domestic fuel prices low, according to Reuters.
The Canadian Association of Petroleum Producers’ CEO warned that imposing tariffs would increase energy and gasoline costs for US consumers.
Energy sector opposes Trump’s tariffs
In a break away from tradition, US oil trade groups have voiced their concerns about Trump’s proposed tariff increases.
“Across-the-board trade policies that could inflate the cost of imports, reduce accessible supplies of oil feedstocks and products, or provoke retaliatory tariffs have the potential to impact consumers and undercut our advantage as the world’s leading maker of liquid fuels,” a representative for the American Fuel and Petrochemical Manufacturers told Reuters.
The US Petrochemical Association also emphasized that it would continue to pursue government officials to not form such policies, which could harm America’s energy advantage.
Trump’s policies to boost domestic production
According to Commerzbank AG, measures to increase US oil and gas production are to be taken just a few days after President-elect Trump takes office.
These include oil drilling off the coast of the US and on federally-owned land as well as restocking the strategic petroleum reserves (SPR).
Commerzbank AG commodity analyst Carsten Fritsch, said in a report:
In addition, as part of the energy policy agenda, the previous government’s tax incentives for the purchase of electric vehicles are to be repealed, new power plants’ environmental standards lowered and the construction of new LNG export terminals authorised.
Fritsch believes that these measures would increase oil and gas production in the US in the medium to long term. However, this may not translate into higher exports as US consumption is also likely to rise, he added.
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