Oil Ticks Higher as Investors Weigh New US Tariffs

Oil prices have been on the rise in recent weeks, with investors closely monitoring the impact of new U.S. tariffs on energy imports. The Trump administration's decision to impose tariffs on Canada, Mexico, and China has sparked concerns about potential disruptions in global energy supply chains and their impact on oil prices. As of February 2025, oil prices have been climbing, with West Texas Intermediate (WTI) crude oil futures reaching $73.8 per barrel and international Brent crude oil futures climbing to $76.21 per barrel.



The new tariffs, which include a 25% tariff on imports from Canada and Mexico, and a 10% tariff on goods from China, have raised concerns about increased costs for U.S. refiners and potential supply disruptions. Canada is the largest supplier of crude oil to the U.S., accounting for over 20% of U.S. refinery inputs, while Mexico supplies about 7% of U.S. crude oil imports. The tariffs on Canadian crude oil could lead to higher fuel costs in the Midwest by increasing prices or causing supply disruptions, as reported by the U.S. Energy Information Administration (EIA).

Goldman Sachs, in a recent note, expects near-term pain for gasoline prices, especially in the U.S. Midwest, where many refineries rely on Canadian crude. The investment bank estimates that Canadian oil producers will bear most of the burden of the tariff, with a $3 to $4 per barrel wider-than-normal discount on Canadian crude, while U.S. consumers of refined products will bear the remaining $2 to $3 per barrel burden.

However, the long-term impact of these tariffs on oil prices remains uncertain. While some analysts, such as Andy Lipow, President of Lipow Oil Associates, warn of a potential worldwide recession that could cause oil prices to plummet, others, like Goldman Sachs, expect minimal impact on global oil prices in the immediate term due to stable oil supply.

The U.S. energy sector is expected to adapt to the new tariffs by seeking alternative supply sources and exploring domestic production opportunities. U.S. refiners may look to process more domestic crude oil and explore Middle East alternatives, while Mexico and Canada may divert their oil volumes to Europe and Asia. In the long run, these adaptations could lead to a more resilient and competitive U.S. energy market.

In conclusion, the new U.S. tariffs on energy imports have sparked concerns about potential disruptions in global energy supply chains and their impact on oil prices. While oil prices have been climbing in recent weeks, the long-term impact of these tariffs remains uncertain. The U.S. energy sector is expected to adapt to these changes, seeking alternative supply sources and exploring domestic production opportunities. Investors should closely monitor the situation and consider the potential opportunities and risks that may arise from these developments.