The impact of US tariffs on the oil industry

The impact of US tariffs on the oil industry

First, the escalation of the trade war directly affects global crude oil demand expectations. The US tariff policy will largely affect the world economic recovery and growth, and may lead to a recession in the US economy. Any expectation of a slowdown in economic growth will lead to heightened concerns about oil demand. This concern is reflected in international oil prices, which are highly volatile.

Take the US-Canada trade war. In the first 10 months of 2024, the United States imported about 6.6 million barrels of crude oil per day, including 4 million barrels of heavy crude to upgrade refineries and crackers, according to the U.S. Energy Information Administration. Seventy-five percent of U.S. heavy crude oil imports come from Canada, and about 80 percent of Canada's crude oil production goes to U.S. refineries. Since Trump's tariff threat, U.S. imports of Canadian crude reached a record 4.42 million barrels per day and rose 11.8 percent in the final quarter. Canada's trade surplus with the United States widened to C $11.3 billion in December from C $8.2 billion previously. As things stand, a large majority of Canadians support retaliatory tariffs against the United States, and last year, Canada's import and export trade with the United States exceeded $1 trillion for the third consecutive year. Trump now has to announce a moratorium on additional tariffs, but the market fears that once the high tariffs are implemented, the huge demand for crude oil imports in the United States may be wiped out.

Second, punitive tariff policies will lead to a rise in global trade costs, forcing oil trade to reroute, and further aggravating the uncertainty of international oil prices. The United States has imposed tariffs on imported steel and aluminum, increasing the cost of domestic oil extraction and transportation, and indirectly pushing up oil prices. At the same time, the global economic slowdown caused by trade friction is expected to put downward pressure on oil prices. This complex interaction makes fluctuations in international oil prices more unpredictable.