Shift Key with Robinson Meyer and Jesse Jenkins The Trump Policy That Would Be Really Bad for Oil Companies
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Jan 29, 2025 Rory Johnston, an oil markets analyst and lecturer at the University of Toronto, dives into the potential fallout from President Trump's proposed 25% tariffs on Canadian and Mexican crude oil imports. He explains how these tariffs could severely impact U.S. refineries that rely on Canada’s heavy oil. The discussion covers the historical evolution of U.S.-Canadian oil trade, the environmental implications of different extraction methods, and how grassroots activism shapes pipeline developments. Johnston also addresses the economic consequences for consumers and refiners.
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U.S.-Canada Oil Trade Evolution
- The U.S.-Canada oil trade has evolved from the U.S. importing and shipping oil north to Canada supplying almost all crude to the Midwest and Mountain regions.
- This shift created a U.S. dependence on Canadian heavy crude and a Canadian dependence on the U.S. market.
Midwest Refinery Specialization
- Midwest refineries are specialized for Canadian heavy crude, making switching to other sources difficult.
- Blending heavy crude with lighter domestic oil is crucial for these refineries, requiring significant investment in specialized equipment.
Refinery Constraints
- Refineries face economic and physical constraints when adapting to different crude types.
- Specialized equipment for heavy crude becomes worthless with lighter crudes, and refineries have limited capacity for lighter hydrocarbons.