Canada’s oil patch rattled by Trump’s tariff threat
Canada’s oil patch rattled by Trump’s tariff threat
Getty ImagesIn Canada’s oil-wealthy province of Alberta, there is a deep sense of unease over President-elect Donald Trump’s threat to impose a 25% tariff on Canadian goods.
Canadian politicians and vigor experts are warning the hefty tariff would have dire consequences for the economy of America’s northern neighbour – and hike prices on US consumers.
“Canada has no selection in this,” Dennis McConaghy, an Alberta-based former vigor executive, told the BBC.
“It has to discover an accommodation with Trump.”
Trump announced on Monday that, upon taking office in January, he would slap an across-the-board tariff on Mexico and Canada – with no suggestion that would exclude oil and gas.
It remains ambiguous whether the tariffs will ultimately materialise, analysts have noted, as Trump has been known to use such threats in the history as a negotiating tactic to achieve his goals.
In this case, Trump has signalled that the levies would remain in place until both Canada and Mexico work on securing their shared borders with the US, limiting the number of unlawful migrants and drugs flowing into the country.
As the threat lingers, Canadian officials and industry leaders are working to meet Trump’s demands, while communicating to the community the importance of the Canada-US vigor collaboration.
Lisa Baiton, president and CEO of the Calgary-based Canadian Association of Petroleum Producers, said the levy would likely cruel Canada producing less oil.
Mr McConaghy said that would navigator to job losses in Alberta, with potential repercussions for Canada as a whole, as poorer provinces depend on funds transfers from revenues generated by wealthier provinces – like Alberta – to assist offset costs and provide social services.
It could also navigator to a devaluation of the Canadian dollar at a period when the funds is already struggling due to domestic economic factors, he said.
“Keep in mind, roughly 80% of Canada’s trade is with the United States, and a majority of that trade is in hydrocarbons. Canadians can’t escape how integrated they are with the US.”
US fuel makers have also urged Trump to rule out oil and gas from any proposed levies given that Americans depend heavily on imported Canadian crude.
“Crude oil is to refineries what flour is to bakeries,” said the American Fuel and Petrochemical Manufacturers (AFPM) industry throng in a statement this week.
“It’s our number one feedstock and input expense. If those feedstocks were to become significantly more expensive, so too would the overall expense of making fuel here in the United States.”
The US is the globe’s largest producer of crude oil and natural gas, but some regions – California, the northeast and parts of the Midwest – do not have the infrastructure or pipeline capacity to depend solely on US oil and require imports to supply fuel to consumers.
Around 40% of the crude that runs through US oil refineries is imported, and the vast majority of it comes from Canada.
Canadian oil is especially relied on in the landlocked Midwest, where refineries have been outfitted to procedure the heavier Canadian blends.
The AFPM said there is no straightforward replacement for that crude without relying on overseas sources that could erode US vigor safety.
The industry throng warned that a tariff on Canadian oil would drive up operating costs in the Midwest – costs some experts declare will be downloaded onto consumers.
Patrick De Haan, a Chicago-based gas prices analyst, estimated that states like Minnesota, Wisconsin and Michigan could view gas prices rising by up to 75 cents a gallon.
Mr De Haan noted in a post on X that these higher prices would not only be felt at the pump, but could potentially boost costs for airlines and freight haulers as well.
An boost in oil prices for US consumers would run counter to Trump’s commitment to slash vigor costs.
On the campaign trail, Trump frequently said he planned to cut the worth of gasoline to under $2 (£1.57) a gallon. As of late November, the worth of regular gasoline in the US sat around $3 a gallon.
But Trump has also vowed to boost American vigor independence by boosting domestic drilling and being less reliant on foreign oil and gas, particularly from countries not allied with the US.
Getty ImagesPrime Minister Justin Trudeau is promising to now a united “throng Canada” front and to work together with the incoming Trump administration to avoid the blanket tariffs.
The leaders of major Canadian provinces like Ontario, Quebec and Alberta have urged Trudeau to act quickly on these demands, and on Wednesday, Trudeau held an emergency conference with provincial and territorial leaders to discuss how to shift forward.
Danielle Smith, premier of Alberta, said her province will be “working aggressively” in the coming months to connect with US counterparts and to drill home the communication that a powerful collaboration with Canada would be of advantage to the US and its vigor safety.
She said that in her view, Trump “and the tens of millions of Americans who voted for him have valid concerns” related border safety.
The number of crossings at the US-Canada border is significantly lower than that at the southern border, according to US Border Patrol data on migrant encounters.
During the 2024 budgetary year, there were around 23,700 apprehensions at the northern land border, while the southern border saw more than 1.53 million apprehensions.
Crossings at the US-Mexico border dropped sharply this summer after reaching record highs earlier under the Biden administration, in part due to efforts by Mexico to implement measures like setting up recent checkpoints and increasing patrols.
Canada’s immigration minister Marc Miller has said that while crossings at the northern border are much lower, there is still work to be done to stop them.
Smith and other premiers have asked Trudeau to arrive up with a comprehensive border safety schedule.
She also said Alberta is exploring the alternative of creating specialised sheriff units to patrol its own shared border with the US state of Montana.
No matter the way, Mr McConaghy said he hopes there is an urgency among Canadian officials to get the hazard of tariffs “off the table as soon as feasible”.
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