Trump threatens to impose tariffs on Canadian crude oil, which could raise fuel prices in the United States.

President Trump threatens to impose tariffs on Canadian crude oil imports, which could potentially lead to higher gasoline prices for American consumers. According to predictions from major refining companies and energy analysts, if the tariffs are officially implemented next month, fuel prices in the United States will be impacted. Trump signed an executive order on February 1 planning to impose a 10% tariff on Canadian energy imports, as well as a 25% tariff on goods from Canada and Mexico. Currently, these tariffs have been postponed until March 4, as the Mexican and Canadian governments have reached a temporary agreement with the White House. Despite being the world's largest oil producer, with production exceeding Saudi Arabia and Russia, U.S. Midwest refining companies still heavily rely on Canadian crude oil. According to analyst reports from Wells Fargo & Company, Canadian crude oil is denser, of lower quality, and relatively cheaper, making it the primary choice for refining companies. Marathon Petroleum (MPC.US) is one of the United States' major heavy crude oil processors. The company's CEO, Maryann Mannen, recently stated during an earnings conference call that if the Canadian energy tariffs go into effect, the company's crude oil purchase costs will increase. She mentioned that most of the tariff costs may be shouldered by Canadian producers, but will ultimately be partially passed on to consumers. Mannen added that the company is in communication with the government, relevant agencies, and industry associations to ensure policymakers fully understand the potential impacts of this decision. White House officials told reporters on February 1 that Trump decided to impose a lower 10% tariff on Canadian energy imports, instead of 25%, mainly to minimize the impact on gasoline and home heating prices. According to statistics from Lipow Oil Associates President Andy Lipow, the U.S. imports nearly 6.6 million barrels of crude oil per day, with about 60% coming from Canada. Additionally, 70% of the crude oil processed by Midwest refineries comes from Canada, making these refineries highly dependent on Canadian supplies. The future increase in fuel prices will depend on the strategies adopted by Canadian producers and U.S. refining companies. In a report on February 2, Lipow pointed out that if the 10% tariff is fully passed on to consumers, gasoline and diesel prices in the U.S. could rise by 15 cents per gallon. Furthermore, Canadian oil producers have alternative markets. Former Canadian Finance Minister and current Prime Ministerial candidate Chrystia Freeland warned in an interview on February 4 that Canada can choose other markets instead of continuing to rely on the U.S. "The U.S. should be glad to have us as a reliable energy supplier, but we do have other options. If necessary, we will take retaliatory measures." However, U.S. refining companies have limited options. Mason Mendez, an investment strategy analyst at Wells Fargo & Company, stated in a report on Monday that the U.S. has almost no economically and politically feasible alternatives to replace Canadian heavy crude oil. While domestic oil production in the U.S. can offset some of the reduced Canadian supply, American crude oil is generally lighter than Canadian crude, posing technical challenges for many refineries to fully transition to light oil. Lipow also indicated that Canadian producers may redirect exports to Europe and Asia, which would force East Coast refineries in the U.S. to rely on more expensive West African crude oil, while West Coast refineries might have to import oil from South America or the Middle East. In the Midwest, due to limitations in logistics infrastructure, Canada is currently unable to fully switch exports to other markets, but they will still seek new buyers as much as possible. Lipow stated that once Canada reduces its supply to the U.S., traders may push up prices of domestic U.S. crude oil to compensate for the shortage. Preliminary estimates suggest that fuel prices could rise by 15 cents per gallon as a result, but if the tariffs lead to regional supply shortages, prices could even surge by over 30 cents. Additionally, there are relatively limited import channels in the Midwest. Lipow pointed out that the U.S. pipeline system mainly flows north-south and east-west, making it difficult for the Midwest region to import alternative crude oil through Gulf Coast ports. Therefore, even if Midwest refineries want to find other suppliers, they will be restricted by logistical bottlenecks. In the absence of many options, U.S. refining companies might still need to continue importing oil from Canada despite the rising costs. Mendez suggested that U.S. refineries could negotiate with Canadian producers to share some of the tariff costs, rather than passing them entirely to the U.S. market. Mendez added, "Even with both parties sharing the impact of tariffs, the price of gasoline in the U.S. may still see a moderate increase." Currently, the market is closely watching the final decision on March 4. If the Trump administration indeed enforces a 10% tariff on Canadian crude oil, fuel prices in the U.S. could continue to rise, potentially worsening trade tensions between the U.S. and Canada. For American consumers, the increase in fuel costs could further raise overall inflation pressure, affecting economic growth expectations.