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The introduction of a 10% tariff on oil is not expected to have a significant initial impact on gasoline prices in the Midwest, where 15% of U.S. refining capacity is dependent on Canadian oil, according to Tim Moore, Senior Research Analyst at Clear Street.
WTI crude oil prices are forecasted to experience a moderate increase of 3-4%, which would bring the price to approximately $75-76. This projected rise is attributed in part to the tariffs on Canadian oil, along with expected retaliatory measures from Canada and Mexico.
The price gap between Canadian oil and West Texas Intermediate (WTI) crude is anticipated to remain substantial, with a consistent $16 spread estimated to last for around two months. This prediction indicates that Canadian oil will continue to be significantly cheaper than WTI, even as the market adjusts to the new tariffs.
Moore also highlighted the potential for Mexico to impose its own tariff on U.S. oil imports. Should this occur, it could result in an increase in the U.S. oil supply. An increased domestic supply could help to counterbalance the upward pressure on WTI prices caused by the tariffs.
Moore concludes that the most considerable impact of the tariffs on U.S. consumers is likely to stem from increased costs for autos, Mexican produce, industrial machinery, appliances, and electronics.
These sectors are expected to feel the tariffs’ effects more acutely than the oil industry, which may see relatively muted price changes for Midwest gasoline in the immediate future.
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