Anxious times in Alberta’s oilpatch with potential Trump tariff hit just
Canada and the United States have often been described as the best of friends and closest of allies. Two countries sharing the longest border in the world and intricately linked in countless aspects of life, especially as economic partners.
It’s an adage that sure seems fraught right now on the eve of a trade war that could explode next week when Donald Trump returns to the White House.
The president-elect’s threats of widespread tariffs, and Canada’s threat of its own tariffs in response, has the potential to impact hundreds of thousands of jobs, ignite inflation pressures and bruise the financial health of many industries.
In particular, Alberta and its oilpatch are in the crosshairs as energy is Canada’s largest export to the U.S., worth about $125 billion in 2023.
A massive tariff applied to the four million barrels of oil that flow south every day could drive down prices of Canadian oil, lead companies to pull back on production, and damage the bottom line of the provincial government.
“There’s a lot of concern,” said Jackie Forrest, executive director of the ARC Energy Research Institute in Calgary.
“I wouldn’t say there’s panic yet, because I think there’s still the potential that we don’t see the tariffs,” she said.
The hope in the oilpatch is that the tariffs are just posturing and a negotiating tactic by Trump. There’s also some belief the sector will be exempt or tariffs will be gradually introduced.
Tariffs would be paid by U.S. refineries and importers. The added cost could drive up the price of fuel for drivers, with estimates varying between an extra 25 to 75 cents US per gallon of gasoline in the Midwest.
Still, Canadian oil producers would likely feel financial pressure, too. For instance, some refineries may not be able to pass on the extra cost to consumers if they are competing in a market with refineries that process U.S. oil, or bring in fuel from other parts of the country.
“I do think we’re going to see a reduction in demand for our crude oil in this scenario. And because we don’t have alternative markets, we have very few outlets,” said Forrest.
That would potentially result in companies in Western Canada filling storage tanks with oil to build inventories, she said, as well as “lower prices for Canadian crude oil.”
Donald Trump is set to be inaugurated on Monday, and he has made his intention clear about imposing a 25 per cent tariff on imports from Canada. Richard Masson, an executive fellow at the University of Calgary’s School of Public Policy, explains the potential impact this could have on the energy sector.
Boardroom backup plans
Some Canadian oil producers have been trying to protect…
Read More: Anxious times in Alberta’s oilpatch with potential Trump tariff hit just