Editorial comment
If there is anything that is to be understood about 2025 it is that the US remains an unpredictable place. This past month, the Trump Administration set us all on a rollercoaster of emotions as it announced that tariffs on Canadian and Mexican goods would go into effect at midnight on 4 March. This didn’t last long as the Administration changed its mind and put a delay on goods covered under the 2020 US Mexico Canada Agreement (USMCA).1 Trump first decreed and subsequently delayed these tariffs after their initial announcement at the beginning of February when Mexico and Canada made concessions to secure a delay. This has led to levels of uncertainty being higher than they’ve been for decades. This could not be truer for the oil and gas industry, a sector which is famously sensitive to uncertainty.
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The Trump Administration imposed a 10% tariff on imported goods from Canada and pitched a steeper 25% tariff on Mexican goods.2 Now while some within the industry feel they won’t suffer much in the way of a negative impact, many analysts predict a volatile future for the North American sector if this is to continue. The tariff policy and repeated changes in implementation and rates have analysts concerned about higher gasoline and natural gas prices. US refineries in the Midwest rely on Canadian crude for gasoline, diesel, and jet fuel production with the region receiving roughly 75% of Canada’s total crude exports.3 In the existing system these refiners benefited greatly from favourable refining margins and a deeply interconnected system. A 10% tariff would increase costs for US refiners, however, the hope is that this deeply integrated system could discourage Canada from ceasing all oil exports with some analysts predicting that 90% of oil imports will continue to flow into the US.4
Meanwhile Mexico has been given a much harder pill to swallow. The position the country has been put in has been noted to be far worse as any retaliatory action from Mexico could direct US refiners on the Gulf Coast to seek alternative sources. Venezuelan crude, Middle Eastern heavy grades, and even some Canadian barrels rerouted from PADD 2 could replace Mexican oil.3 Mexico’s President Sheinbaum was quick to respond and it was through her own diplomatic manoeuvring which secured the delay to 2 April. The hope now, is that Mexico will have bought enough time to secure its oil and gas sector by that deadline.
The interconnectivity of the North American oil and gas sector means that the present unpredictability of US trade policy has left industry stakeholders cautious about the future. The hope is for calmer heads to prevail otherwise the US’s pursuit of oil and gas independence may come back around to bite itself and, like a great North American Ouroboros, end up weakening its own oil and gas industry in the process.
- LANDRY, C., ‘Trump tariff flip flops put energy industry on edge’, Oil & Gas Journal, (10 March 2025), https://www.ogj.com/general-interest/government/article/55273520/trump-tariff-flip-flops-put-energy-industry-on-edge
- CHAVEZ, A., GOMES, T., ROMERO, Y., and TREVIZAN, K., ‘Petrochemical industry mostly dismisses negative effects of US tariffs on their operations’, S&P Global, (3 March 2025), https://www.spglobal.com/commodity-insights/en/news-research/latest-news/chemicals/030325-petrochemical-industry-mostly-dismisses-negative-effects-of-us-tariffs-on-their-operations
- RAPIER, R., ‘How Trump’s Tariffs On Mexico And Canada Could Impact U.S. Gas Prices’, Forbes, (4 March 2025), https://www.forbes.com/sites/rrapier/2025/03/04/how-trumps-tariffs-on-mexico-and-canada-could-impact-us-gas-prices/
- OLESZEK, K., ‘Tariffs Set to Shake Up US Crude Market’, East Daley Analytics, (4 March 2025), https://www.eastdaley.com/media-and-news/tariffs-set-to-shake-up-us-crude-market
