Threatened US tariffs on Canadian and Mexican imports have thrown North American commodity markets into turmoil, both because of the scope of the proposals and the lack of details on how they might work.
The information vacuum created by the US in between declarations from President Donald Trump has left commodity producers, consumers and traders unsure how to prepare. The Treasury Department and Customs and Border Control are not providing guidance on how a 10pc tariff on Canadian energy and 25pc tariff on all Mexican imports — currently set to come into effect on 4 March at 12:01am ET — would actually be administered.
Reaction to the unknowns have varied from one company and politician to the next. Below are some of their comments:
Refining:
"There is no easy, fit-for-purpose replacement for this [Canadian] crude oil," the American Fuel and Petrochemical Manufacturers (AFPM), which advocates for many US refiners, said on 27 November.
Western Canadian crude will continue to flow to US refiners, but at a greater discount if President Donald Trump enacts tariffs on imports from that country, Phillips 66 executive vice president of commercial Brian Mandell said on 31 January. But "crack margins will also have to do some work" in the Rocky Mountain and midcontinent regions, where refiners have fewer alternative supplies.
Tariffs would lead to price increases and most of these "will ultimately be borne by the producer" and to a lesser extent the consumer, said Marathon Petroleum chief executive Maryann Mannen said on 4 February.
If threats for US tariffs on Canadian crude were to eventually go through, the cost would be split between producers, refiners and customers, Delek chief executive Avigal Soreq said on 6 February.
It is a dynamic scenario and "very difficult to predict what will happen to margins on the northern tier," BP chief executive Murray Auchincloss said on 11 February.
The tariffs would cause a sizable disruption and "have some impact on throughput," US independent refiner PBF Energy chief executive Matthew Lucey said on 13 February. Switching to alternative crudes would lead to lower yields of gasoline, diesel and other fuels because refineries are optimized around a certain type of crude, he said.
US independent refiner HF Sinclair has "the ability to lighten up" and switch to alternative crudes if impending US tariffs on Canada go into effect next month, HF Sinclar commercial vice president Steven Ledbetter said on 20 February.
Upstream:
"A 25pc tariff on oil and natural gas would likely result in lower production in Canada and higher gasoline and energy costs to American consumers while threatening North American energy security," Canadian Association of Petroleum Producers (CAPP) president Lisa Baiton said on 26 November.
"Canada's regulatory uncertainty, negative investment climate and the continued implementation of harmful policies has positioned Canada in a weak negotiating position with a lack of diversity in market access," said the Explorers and Producers Association of Canada (EPAC) on 16 January.
"We don't know what's going to happen with tariffs and I don't have any unique insight," Imperial Oil chief executive Brad Corson said on 31 January. "I'm hopeful that as we move forward, diplomacy will prevail and we will end up with no tariffs, no restrictions on energy flow."
"All the work we've been doing over the last eight years has been to drive our production to the low end of the cost of supply curve," ExxonMobil chief executive officer Darren Woods said on 31 January. "None of that's going to change with tariffs."
"I would say that I don't know that anyone on the planet knows exactly what's going to happen on tariffs," Suncor chief executive Rich Kruger said on 6 February.
If tariffs were to be implemented, it is "pretty difficult" to say exactly who would carry the burden -- producers or buyers, said Andy O'Brien, ConocoPhillips senior vice president for strategy, commercial, sustainability and technology on 7 February. "The refiners in the Midwest and the Rockies have less options to substitute versus, say, the Gulf coast or the west coast refiners," O'Brien said.
"It's not really clear to us who's going to pay which portion of the tariff," said Cenovus chief executive Jon McKenzie on 20 February. "If we are in a world, unfortunately, in March, where tariffs do come, we will watch those price signals and react accordingly."
Cenovus executive vice president of commercial Geoff Murray expects that tariffs would drive "as much volume as possible" through the 890,000 b/d Trans Mountain system to Canada's west coast, destined for global markets rather than California, which currently takes about half of the pipeline's exported volume.
Midstream:
"If [the tariffs] do come in . . . that product is still going to be needed," said Enbridge chief executive Greg Ebel on 6 January. "It is not my preferred route, but the product will flow."
Trans Mountain has seen a "flurry of activity" in booking westbound pipeline capacity since US president Donald Trump's administration announced its intent to slap tariffs on imports, said Trans Mountain senior director of business development Jason Balasch on 7 February. "The tariffs have opened all level of government's eyes to talk of expansions."
"We fully expect that under all Canada-US trade relations outcomes, Canadian oil will continue to flow south," Enbridge chief executive Greg Ebel said on 14 February. "We've got tariff concerns out there, but there's such a hard wiring of the energy system in North America, we just don't see that as a material impact."
"We thought that was a little bit further out," Gibson Energy chief executive Curtis Philippon said of a potential expansion of tankage near the inlet of the Trans Mountain pipeline system on Canada's west coast on 19 February. The midstream company commissioned two 435,000 bl tanks at the Edmonton terminal in December and tariff threats seem to have expedited talk on adding two more.
Trading:
"The fact that the initial tariffs around Canada and Mexico were so punitive at 25pc, how someone handles that risk ... is extremely difficult," said Equinor vice president of crude trading and refinery optimization Simon James on 6 February. "I think that's something the market is starting to work through and I don't think there's a good answer yet."
"For us as traders, it also creates market opportunity, but it certainly does create a lot of market uncertainty," said Chevron vice president of crude supply and trading Barbara Harrison on 6 February.
"Already today, traders and people who are trying to connect the dots, are looking into how they should change their buying patterns," SOCAR chief trading officer Taghi Taghi-Zada said on 6 February. While the actual imposition of tariffs would be an important milestone, he said, the fact people are speaking about them with confidence has already affected the markets.
Politicians:
"[The federal government] will have a national unity crisis on their hands at the same time as having a crisis with our US trade partners," Alberta premier Danielle Smith said on 13 January in response to the suggestion Canada was considering cutting off energy flows to the US in retaliation to tariffs.
"Everything is on the table," Canadian prime minister Justin Trudeau said of his tariff retaliation plans on 15 January.
"The point in [Canada's] response is to apply political pressure," said Canada's minister of energy and natural resources Jonathan Wilkinson on 15 January. Canada will likely focus on goods that are "important to American producers," but also those for which Canada has an alternative.
Alberta premier Danielle Smith on 16 January called on Canada to "immediately start construction on the Northern Gateway and Energy East pipelines" to decrease the country's reliance on US customers in the wake of threatened tariffs by president-elect Donald Trump. There is no active proposal for either pipeline.
"We've been here before," said Canadian prime minister Justin Trudeau on 21 January, citing Trump's first term in office that challenged the trading relationship both sides were able to work through. "Our focus is remaining calm."
"If the president does choose to implement any tariffs against Canada, we are ready with a response," said Canadian prime minister Justin Trudeau on 31 January. "A purposeful, forceful, but reasonable, immediate response."
"US-based businesses will now lose out on tens of billions of dollars in new revenues," Ontario premier Doug Ford said on 3 February as he banned US companies from provincial contracts. "They only have President Donald Trump to blame."
"[Heavy Canadian oil] is by far the most affordable option for American companies and consumers, and it enables the export of US light crude to countries around the world, creating additional profit for American companies but also creating additional tools to be used in the context of geopolitics," said Canada's energy and natural resources minister Jonathan Wilkinson on 4 February.
"In Canada, this has caused some reflection on whether perhaps in some areas we are too dependent on infrastructure in particular that flows only through the United States ... certainly in the areas like oil, we flow almost all of it this way," said Canada's energy and natural resources minister Jonathan Wilkinson on 4 February.
"Working families across the country are being put in the crosshairs of Trump's policies with our trade partners," Illinois governor JB Pritzker said on 10 February.
"Get the Keystone pipeline in place. Now whether he wants, the president, wants to charge tariffs to Canada, that's something that can be negotiated deal by deal," US representative Randy Weber (R-Texas) said on 25 February.
Analysts:
The US' trade deficit with Canada is largely a result of America's thirst for energy and should not be confused with a "subsidy", economists at TD Bank said on 21 January.
"I don't think Trump actually wants tariffs on Canada or Mexico," said Kpler economist Reid I'Anson on 5 February, noting Trump was quick to get on the phone with the two countries, but not so much with China.
"The extent of the price impact depends on one's locations, but certainly seems to me that the consumer will be paying more for energy," said Lipow Oil Associates president and industry analyst Andrew Lipow on 27 November.
