The Canadian energy industry expects that U.S. President-elect Trump's proposed protectionist tariff policies will not affect Canadian oil imports because U.S. refineries are highly dependent on Canadian heavy sour crude oil. Analysts note that although Trump has proposed a 10% tariff on imported goods, this would lead to an increase in refining costs and consequently, higher fuel prices. Therefore, it is highly likely that Canadian oil will be exempted from tariffs.
Currently, Canada is the world's fourth-largest oil producer, exporting about 4 million barrels of crude oil daily to the United States. This trade relationship is crucial for Canada. U.S. refineries, particularly those in the Midwest and the Gulf Coast, have heavily invested in processing Canadian imported heavy sour crude. In the Midwest, almost all refineries rely on Canadian imports for their feedstock.
Industry insiders suggest that Trump's election might lead to more investment in North America's energy sector, as a reduction in regulatory measures could attract more capital to the oil and gas fields. Trump's supportive stance on oil and gas development is likely to boost the growth of the Canadian energy sector.
Additionally, the strengthening U.S. dollar against the Canadian dollar benefits Canadian oil producers. The Canadian dollar is currently near a two-year low, which means Canadian oil companies can cover costs in Canadian dollars while selling their products at higher U.S. dollar prices. In 2023, Canadian energy exports to the U.S. reached 124 billion Canadian dollars, and the Trans Mountain expansion project will further increase export potential to Asia.
However, despite the favorable outlook for Canadian energy exports, the growth in U.S. oil and gas production will introduce new competition for Canadian producers in the global market.
