Market Analysis

US Gas Prices Expected to Rise as New Trump Tariffs Impact Energy Imports

Amos Simanungkalit · 05 Mar23.6K Views

Image Credit: Reuters

U.S. retail gasoline prices are expected to rise in the coming weeks due to new tariffs imposed by President Donald Trump’s administration, which are driving up the cost of energy imports, according to analysts and traders.

This highlights a possible unintended effect of Trump’s protectionist trade policies, which aim to boost the U.S. economy but could lead to higher consumer costs. The new tariffs, which include a 25% levy on all imports from Mexico, a 10% tariff on Canadian energy, and a 20% increase in duties on Chinese goods, took effect on Tuesday. The U.S. also imposed 25% tariffs on all other Canadian imports.

The tariffs have already caused a spike in wholesale gasoline prices, particularly in the U.S. Northeast, a region that depends heavily on gasoline, heating oil, and diesel imports from Canada. This price increase is expected to soon affect retail fuel prices in New England, where prices could rise by 20 to 40 cents per gallon, according to fuel experts.

As of last week, retail gasoline in New England was priced around $3 per gallon, according to the Energy Information Administration. GasBuddy analyst Patrick De Haan noted that the Northeast would feel the brunt of the price hike first.

Irving Oil, a major Canadian refiner supplying the Northeast, increased fuel prices on Tuesday to account for the tariff costs. The company has previously stated that the tariffs would result in higher prices for U.S. customers. Irving’s refinery in Saint John, New Brunswick, exports over half of its refined fuel to the Northeast.

According to TACenergy, there is no simple alternative for the products from Irving’s refinery, which serves multiple terminals in the area. Other refiners that primarily process Canadian crude are expected to bear the increased cost of imported materials, while those using Canadian crude on the margin may switch to lighter crude grades, which could drive up the prices of U.S. benchmark West Texas Intermediate crude and global Brent crude.

Regions relying on crude imports from Canada and Mexico are also likely to see a rise in fuel prices. The U.S. imports about 4 million barrels of Canadian oil per day, with 70% of it processed by refineries in the Midwest, while 450,000 barrels of Mexican oil are imported, primarily for Gulf Coast refineries.

In the Midwest, pump prices could increase by 10 to 15 cents per gallon in the coming weeks, according to Alex Ryan, energy director at Oasis Energy in Kansas. As of Tuesday, average U.S. pump prices held steady at $3.099 per gallon, slightly lower than the previous day but still about 8% lower than a year ago.

While the impact of the tariffs on gas prices is uncertain, AAA noted that other factors, like the current lower price of crude oil, could help offset the upward pressure on prices. Industry representatives have criticized the tariffs, saying they increase costs for consumers and don’t contribute to energy security.

Chet Thompson, CEO of the American Fuel and Petrochemical Manufacturers, expressed hope for a quick resolution, stating, “Imposing tariffs on energy, refined products, and petrochemical imports will not make us more energy secure or lower costs for consumers.”