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The Tariff Ripple Effect: How a 10% Tariff on Canadian Heavy Oil Could Drive Up U.S. Trucking Costs

The Tariff Ripple Effect: How a 10% Tariff on Canadian Heavy Oil Could Drive Up U.S. Trucking Costs

Exploring the Impact on Diesel Prices, Supply Chains, and the Broader Economy

February 02, 2025

Analyst and Traders no longer have to listen to the earnings call, simply as your question here

Key Refined Products from Canadian Heavy Oil:

Diesel Fuel: Vital for trucking, rail, and industrial machinery.
Gasoline: Used primarily for personal and commercial vehicles.
Jet Fuel: Powers commercial and cargo aviation.
Asphalt: Essential for road construction and maintenance.
Petrochemicals: Feedstocks for plastics, chemicals, and synthetic materials.

Heavy Oil Imports and Key Refineries:

Import Volume: The U.S. imports approximately 4 million barrels of Canadian heavy oil daily.
Main Refineries Using Heavy Oil:
- Motiva Port Arthur Refinery (Texas): One of the largest U.S. refineries, optimized for heavy crude processing.
- Marathon Petroleum's Garyville Refinery (Louisiana): Major user of Canadian heavy crude.
- Phillips 66 Refinery (Wood River, Illinois): Processes significant volumes of heavy crude.
- Valero Energy Refineries (Multiple Locations): Depend heavily on Canadian heavy crude.
- BP Whiting Refinery (Indiana): Specifically upgraded to handle heavy crude.

Alternative Sources for Heavy Oil:

Venezuela: Significant reserves but hampered by sanctions and infrastructure issues.
Mexico: Declining heavy crude output.
Middle East: Limited supply of heavy crude, more focused on light sweet crude.
U.S. Domestic Production: Primarily light crude, requiring blending for certain refinery configurations.

Is Canadian Heavy Oil Key?

Yes. The U.S. is heavily reliant on Canadian heavy crude due to:
- Proximity and cost-effectiveness.
- Existing infrastructure (pipelines and refineries optimized for Canadian blends).
- Stable political and trade relations (historically).

Key Impacts on U.S. Consumers: