President Trump's tariffs in Mexico and Canada can raise energy prices for US consumers.
On Tuesday, tariffs were enforced on both American neighbours. The broader tariffs included 10% collection of Canadian energy and 25% collection of Mexican energy.
The US imports more oil from Canada than any other country, with some US regions particularly relying on Canadian oil. Analysts say consumers in these regions can see prices rise soon, including the Midwest, Rocky Mountain and New England.
Andrew Lipow of consulting firm Lipow Oil Associates told Hill that in the short term, gas prices in New England could jump at 15-25 cents per gallon.
He noted that the area imports a significant amount of Canadian gasoline.
Before Trump allowed last-minute delays, when tariffs were last set to take effect, Gasbuddy's Patrick de Haan warned that the New England area could also face a surge in prices for heating oil used in homes.
Meanwhile, refineries in the Midwest and Rocky Mountains import a substantial amount of Canadian crude oil, which can be converted to gasoline.
Lipow said it is not entirely clear how much tariffs will be reduced for consumers in these regions, or how much costs will be absorbed by Canadian oil companies.
“What's unclear at this point is that tariffs force Canadian producers to simply lower the price of oil to offset the fees,” Lipow said.
“Or Canadian oil producers say, “We're not going to lower prices. You, the US, need to come up with that 10% tariff,” he added.
Will Halles, senior European oil and gas analyst at Bloomberg Intelligence, said in a written statement that he expects prices in the Midwest to be affected.
“We can expect to see higher gasoline prices in the coming weeks, especially given that American consumers are 100% dependent on Canadian crude oil, especially in the Midwest, at a one-sided digit percentage, in the Midwest,” he said.
Tom Kloza, global energy analysis director for Oil Price Information Services, said he hopes the Midwest will see the impact, but pointed out that it may not be “huge.”
“Suppose half of the tariffs were absorbed by Canadian oil producers and half were absorbed by US refiners.
The tariffs come when Trump took a positive stance on foreign policy, including US allies accused of not doing his part on issues such as border security.
However, the president has also vowed to cut energy costs. The potential rise in such price increases underscores the obvious tension between those “America First” foreign policy moves and his promise to reduce inflation.
Trump has also committed to “drilling baby drills” and producing more oil at home. Lipou said it could reduce some, not all, of the expected price increases if it happened.
“Refineries in many areas of the Midwest and Rockies can handle very heavy Canadian crude oil and can't replace it with light sweet coarse domestically produced, which could lead to a one-on-one exchange,” Lipow said.
He added that in that case, some refineries may need to reduce the amount of gasoline they actually produce, tighten supply and “ups consumer prices.”
However, this is not the only factor that determines gasoline prices.
Global events can also have significant impacts. For example, the US saw high gasoline prices as a result of Russia's invasion of Ukraine. This is the cost of Trump repeatedly attacking the Biden administration during his campaign progress. Tariffs are expected to raise prices, but they are not expected to rise to levels that reach 2022, when the national average reached $5 per gallon.
The tariffs are also in effect as a group of oil producers OPEC+, which has announced that many analysts will be surprised to see production increase from April.
According to Lipow, OPEC News said it could cut gasoline prices by 2-3 cents per gallon.
On the other hand, gasoline prices tend to rise in the summer with more demand as more people travel and take vacations.
In combination with tariffs, Croza said that this could mean relatively high prices in the coming months, but fall prices are low.
“It's difficult to see exactly what's tied to tariffs and what's tied to the usual types of Sturm and Drang… second quarter prices,” he said, but said the price is not expected to reach its 2022 high.
