REGIONAL- President Donald Trump, on Monday, put a temporary 30-day halt on tariffs he had announced for Canada and Mexico, but the spectre of a 10 percent tariff on Canadian energy imports has not gone away.
While the announcement provided a temporary reprieve, it was clear that the risk of tariffs had not gone away and that any negotiations will be long and challenging.
Minnesota would feel the hit of tariffs in multiple ways, one of which would be at the gas pump.
While record-high output has made the U.S. the world’s largest crude oil producer in recent years, the country imports nearly 4 million barrels per day from Canada, roughly 60 percent of the country’s net oil imports. About 70 percent of that oil goes to refineries in the Midwest, including Minnesota’s two oil refineries, the Flint Hills Resources Pine Bend Refinery in Rosemount and the St. Paul Park Refinery.
With a refining capacity of 375,000 barrels per day, the Pine Bend refinery supplies most of Minnesota’s gasoline, diesel fuel, and jet fuel. St. Paul Park has a capacity of 105,000 barrels per day, and the much smaller Cenovus Energy refinery in Superior, Wis., has a capacity of 50,000 barrels per day and ships its products to four other states besides Minnesota. All three refineries are heavily dependent on imported Canadian crude, supplemented by oil from North Dakota.
As manufacturers traditionally pass the cost of tariffs on to consumers, industry analysts expect Trump’s tariff, if implemented, will drive up the cost of gasoline for Minnesota consumers.
Gas Buddy head of petroleum analysis Patrick DeHaan told FOX Business last week northern parts of the country would bear the brunt of Trump’s tariff increases.
“And who will be impacted? Primarily motorists in the Great Lakes could see gas prices shooting up in excess of 20 cents a gallon. A lot of that Canadian crude oil flows directly down into areas like the Great Lakes, the Midwest, the Rocky Mountain regions, where it may be difficult to find different sources of crude oil.”
And switching to other sources isn’t an option if those sources aren’t the heavy oil used by the region’s refineries. Heavy oil refineries are designed with complex upgrading units to break down the thick, sulfur-rich Canadian oil into useable fuels, while Texas sweet oil refineries are much simpler in design. While a switch could technically be made, the process would be costly and highly inefficient, likely negating most, if not all, of the cost benefits of the changeover.
Trump’s 20-cent-per-gallon tariff tax on gasoline would come on top of seasonal increases that DeHaan had previously predicted earlier in January. Prices could rise anywhere between 25 to 75 cents per gallon by late spring due to regular refinery maintenance, rising demand as temperatures warm up, and the cost involved in switching to more environmentally friendly summer-blend gasoline.
Taken together, consumers could see the average price of a gallon of gas in Minnesota rise from $3.01 today to as high as $3.96 in April or May.