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Tariffs could raise US fuel prices by 10%, analysts say

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Many refineries configured to run heavy Canadian grades

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Midwest refineries most reliant on Canadian crude imports

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Gulf Coast refiners have some capacity to import more OPEC

oil

By Shariq Khan and Nicole Jao

NEW YORK, Nov 27 (Reuters) - U.S. President-elect Donald

Trump's pledge to impose tariffs on Canada would drive up fuel

prices for Americans as it would upend decades-old oil trade

from its top crude supplier, analysts said on Wednesday.

Trump, who takes office on Jan. 20, said this week he would

impose a 25% tariff on all imports from Canada and Mexico until

they clamp down on drugs and migrants crossing the border.

Canadian oil imports would not be exempt under a free-trade deal

from the levies, Reuters reported.

Even as surging oil output to record highs has made the

U.S. the world's largest producer in recent years, more than a

fifth of the oil processed by U.S. refiners is imported from

Canada.

In the landlocked U.S. Midwest, where refineries process

70% of the more than 4 million barrels per day (bpd) of Canadian

crude imports, consumers could see pump prices jump by 30 cents

per gallon or more, or about 10%, based on current prices,

GasBuddy analyst Patrick De Haan said.

If implemented, the tariffs would force those refiners,

including Marathon Petroleum ( MPC ), BP, and Phillips 66

, to either pay a higher price to import oil from these

countries or to find alternative suppliers that would be further

away and thus also more expensive.

In either scenario, a portion of the added costs is likely

to be passed on to U.S. consumers in the form of higher prices

for gasoline at retail pumps, Commodity Context analyst Rory

Johnston said.

"Any tariffs on Canadian oil are going to increase pump

prices given the dependence of much of the U.S. refining

industry on Canadian crude," Johnston said. The cost of crude

feedstock is the biggest component of retail gasoline prices.

BP, Marathon, and Phillips 66 did not immediately respond to

requests for comment.

America's top oil trade groups, the American Fuel and

Petrochemical Manufacturers group and the American Petroleum

Institute, meanwhile, said imposing the tariffs would be a

mistake - exposing a rare moment of discord between the industry

and Trump.

"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 potential to

impact consumers and undercut our advantage as the world's

leading maker of liquid fuels," AFPM said on Tuesday.

Cheaper gasoline was among Trump's top priorities during his

re-election campaign as he sought to connect with consumers

frustrated by sky-high fuel prices in the aftermath of the

coronavirus pandemic, Russia's invasion of Ukraine, the war in

Gaza and other supply disruptions.

Gasoline prices jumped to

over $5 per gallon

in 2022, but have fallen sharply since, hitting $3.04 as of

Monday, the lowest since 2020, the U.S. Energy Information

Administration said.

MIDWEST TO BE HIT HARDEST

Many of the country's refineries are configured to

process heavy Canadian crude grades, and not the light grade

pumped in the booming U.S. shale oilfields.

U.S. Midwest refineries, in particular, are geared to

run the heavier crude shipped across the border by pipeline or

rail.

BP's Whiting refinery in Indiana, the largest fuel supplier

in the Midwest, imported more than 250,000 bpd of Canadian heavy

oil in 2023, or about 57% of its 440,000 bpd refining capacity,

according to RBN Energy.

Other U.S. states will also feel the pinch, albeit to a

smaller extent, GasBuddy's De Haan said.

Major consumer markets on the U.S. East Coast can tap

seaborne cargoes from Europe or Africa if tariffs threaten their

purchases of gasoline from the Irving Oil refinery in Saint

John, New Brunswick, he said.

Irving Oil did not immediately respond to a request for

comment.

West Coast refiners are better geared to process U.S. crude,

he added.

"States that border Illinois are the areas that would be

most impacted because they have the fewest alternatives," De

Haan said.

Gulf Coast refiners have some capacity to import more oil

from members of the Organization of the Petroleum Exporting

Countries such as Iraq, Saudi Arabia, Kuwait and Venezuela,

Commodity Context's Johnston said.

Across the board, many refiners are already facing

significantly lower margins for producing fuel, hitting their

profits in recent quarters.

"These potential tariffs are a kick in the teeth for

refineries," De Haan warned.