Financial Services, November 28 (Editor: Liu Rui) On Monday EST, US President-designate Trump threatened to impose 25% tariffs on all products imported from Mexico and Canada. As soon as this threat came out, not only did American car companies' stock prices plummet, but the US oil industry was also worried.

A number of US oil industry organizations have warned that Trump's tariff plan will raise US gasoline prices and refining costs, thereby increasing US gasoline prices and increasing the burden on consumers.

Furthermore, some analysts believe that the US refining industry is highly dependent on crude oil imports, and it is unlikely that Trump will impose tariffs on imported crude oil.

US refineries are highly dependent on crude oil imports

Patrick De Haan (Patrick De Haan), head of petroleum analysis at GasBuddy, said that if Trump actually delivers on his tariff promises, the additional costs caused by tariffs will increase gasoline prices by 50 cents per gallon during the peak driving season next summer.

During the US president-designate Trump's election campaign, he promised to cut domestic energy costs and reduce gasoline prices to less than $2 per gallon after taking office. However, his current tariff plan seems to be in the opposite direction.

“The situation is not optimistic,” DeHaan said. “This actually runs counter to Trump's stance on deregulation of the oil industry, and is very negative news for refiners.”

Although the United States itself is a major oil producer, a large portion of its domestic oil production is light low-sulphur crude oil, and the country's refineries mainly require heavy sulfur-containing crude oil to produce gasoline and diesel. As a result, although America's own oil production soared to record levels, the country still needed to import crude oil.

According to the data, out of 10 barrels of oil imported from the US, 7 barrels come from Canada and Mexico. Most of it goes to fuel manufacturers in the Midwest of the US, as well as to large refining centers along the Gulf Coast.

More than one-fifth of the crude oil processed by US refineries is imported from Canada. Last year, US fuel makers imported 6.5 million barrels of oil per day, equivalent to the combined production of Iraq and Kuwait.

Trump's tariff threat will once again raise concerns about inflation in the market and could be a heavy blow to US fuel manufacturers.

The US Petroleum Trade Organization seriously warns

Scott Lauermann (Scott Lauermann), a spokesman for the American Petroleum Institute (American Petroleum Institute), the largest trade organization in the US petroleum industry, said:

“Canada and Mexico are our largest energy trading partners, and keeping energy products flowing freely across our borders is critical to North American energy security and American consumers.”

Another major oil trade organization, “American Fuel and Petrochemical Manufacturers (American Fuel and Petrochemical Manufacturers),” said:

“A comprehensive trade policy could drive up import costs, reduce the supply of petroleum raw materials and products, or trigger retaliatory tariffs, potentially affecting consumers and weakening our advantage as the world's leading liquid fuel manufacturer.”

Currently, the biggest buyers of Canadian and Mexican crude oil include British Petroleum, ExxonMobil, and Marathon Petroleum, the largest refiner in the US. Additionally, Motiva, a subsidiary of Pemex and Saudi Aramco, are also on the buyer list. Both companies have refineries in Texas.

Commodity Context analyst Rory Johnston (Rory Johnston) said that once the tariff plans are actually implemented, these tariffs will force these refining giants to either pay higher prices to import oil from these countries or find alternative suppliers that are farther away and cost more. In either case, part of the increased cost is likely to be passed on to American consumers in the form of higher retail gasoline prices.

“Since the US refining industry relies heavily on Canadian crude oil, imposing any tariffs on Canadian crude oil will push up oil prices,” Johnston said.

Trump's Tariff Plan Probably Won't Come to fruition?

Bob McNally (Bob McNally), president of Rapidan Energy Group and a former adviser to the George W. Bush administration, said that about 75% of the crude oil from refineries in the Midwest region of the United States comes from Canada, and if Trump fulfills his threat, these refineries will be the most affected.

In an interview, McNally said, “Canada is inseparable from the refineries in the region, and there are few alternatives.” He believes there is only a 25% chance that Trump will actually implement the tariff plan he announced this week on the oil industry.

David Oxley (David Oxley), a macro-commodity economist at KITU, also said that it is unlikely that the US will impose tariffs on imported crude oil. However, if this were to happen, “it could lead to a decline in oil production in Canada and Mexico, an increase in gasoline prices in the US, and a tightening of the global oil market in the medium term.”