President-elect Trump's proposed additional tariffs on Mexico and Canada are expected to drive up prices.
Late last month, President Trump announced on his first day in office that he would impose 25% tariffs on all products from Canada and Mexico. Analysts say the two countries are major sources of oil imports for the United States, and any tariffs imposed by President Trump could lead to higher gasoline prices.
Andrew Lipow, president of consulting firm Lipow Oil Associates, said the 25% tariff would equate to an additional charge of about 40 cents a gallon.
“Prices at the pump are going to go up. Whether we like it or not, the East Coast is an import market and we're going to have to import oil at a higher price,” Lipow told The Hill. told.
Tom Kloza, global head of energy analysis at Oil Price Information Service, made a similar prediction. He told The Hill that a 25% tariff would increase prices, at least in the short term.
“Adjusting to Canada's 25% tariff will be difficult,” he said. “This could cause a temporary but significant price shock.”
Even President Trump himself has said there is “no guarantee” that import taxes will not increase prices overall.
The proposed tariffs pose a potential challenge for President Trump and the Republican Party, as they are in direct conflict with Trump's “America First” pledge and his pledge to lower consumer prices, including fuel prices. This has become a problem.
The United States' top oil importers are Canada and Mexico, with more than half of the country's oil imports coming from Canada and another 10 percent from Mexico.As of 2022.
Although President Trump has promised to increase domestic oil production, Lipow said increased drilling won't make up for higher Canadian oil prices.
He argued that artificial price increases would cause U.S. producers to raise their own prices to match.
“If prices go up, we just raise prices,” he says. “There are limits to how much production they can increase.”
Unlike countries with national oil companies, the U.S. government cannot decide whether or how much to increase oil production; decisions are made by private companies.
Kloza and Lipau both expect gasoline prices in the Midwest to be particularly hard hit by the tariffs, given the dependence of the region's oil-to-gasoline refiners on Canadian oil. He said there was.
“The U.S. refiners in the Midwest are orphaned buyers. They need Canadian crude and they're going to have to scramble,” Kloza said.
“I think everyone will be affected, but especially some of the battleground states, Michigan, Wisconsin, Minnesota, all bordering Canada. [are] “We're very dependent on Canada's energy supply,” Lipow said.
But Kloza said the price increases caused by the tariffs may not last long.
“In the long term, we will probably see more oil coming from untargeted regions, such as Saudi Arabia, Colombia and even Iraq,” he said.
But Lipow said a lack of pipeline infrastructure could still make it difficult to transport oil from locations outside Canada to major hubs in the United States.
“Canada is the only country that supplies imported fuel and crude oil to the Rocky Mountains and the Midwest,” he said. “The hard part is getting there. You can't import crude oil on the Gulf Coast and ship it to Montana or North Dakota.”
