Why U.S. Tariffs on Canadian Energy Will Hurt Both Sides of the Border
More than 450,000 kilometers of pipelines connect Canada and the United States, enough to circle the Earth 11 times.
Marathon Petroleum's Detroit refinery in the Midwest U.S., the largest processing area for Canadian crude oil imports.
As U.S. imports of barrels of Canadian oil hit a new record, leaders on both sides of the border are warning of the threat to energy security if the incoming Trump administration implements tariffs on Canadian oil and gas.
"We hope that future tariffs will exclude these critical raw materials and refined products," Chet Thompson, CEO of the American Fuel and Petrochemical Producers (AFPM), told Politico's EandE News.
AFPM members produce everything from gasoline to plastics and dominate an industry that includes about 500 refineries and petrochemical plants operating in the United States.
"U.S. refiners depend on crude oil from Canada and Mexico to produce the affordable and reliable fuels that consumers count on every day," Thompson said. The United States is now the world's largest oil producer, but it still needs significant imports — more than six million barrels per day in January, according to the U.S. Energy Information Administration (EIA).
Nearly 70 percent of that oil comes from Canada.
Many U.S. refineries are designed to process "heavy" crude, such as that produced in U.S. reservoirs.
"New tariffs on [Canadian] crude, natural gas, refined products, or critical raw materials that cannot be sourced domestically ... would have a direct impact on energy access and availability for consumers," the American Petroleum Institute, the industry's largest trade association, wrote in a recent letter to the U.S. Trade Representative.
More than 450,000 kilometers of oil and gas pipelines connect Canada and the United States, enough to circle the Earth 11 times. The scale of this vast interconnected energy system is unmatched anywhere else. It's "a powerful card to play" in an increasingly volatile era, researchers at SandP Global said last year.
In 25 years, the United States will import about the same amount of oil as it does today (7.0 million barrels per day in 2050 versus 6.98 million barrels per day in 2023), according to the latest EIA projections.
"We are energy interdependent." "If the Americans cut off Canadian energy, it would be like cutting off their own arm," said Heather Exner-Pirot, a special advisor at the Business Council of Canada. Trump's threat to impose a 25% tariff on imports from Canada, including energy, "would lead to lower production in Canada and higher gasoline and energy costs for American consumers, while threatening U.S. energy security," Lisa Baiton, CEO of the Canadian Association of Petroleum Producers, said in a statement.
"We must do everything in our power to protect and preserve this energy partnership."
Energy products are Canada's largest export to the United States, accounting for about a third of total Canadian exports to the United States, energy analysts Rory Johnston and Joe Calnan noted in a November report for the Canadian Institute for Global Affairs.
The impact of tariffs on Canadian oil is likely to be felt in both Canada and the United States, they wrote: higher pump prices for American consumers, weaker activity for American producers, and reduced returns for Canadian producers.
"It is critically important for Canada to emphasize that it is not just another trading partner, but rather an indispensable part of the U.S. economic and security apparatus," Johnston and Calnan wrote.
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