OPINION:
One of the themes in the very busy first few days of the Trump administration has been the president’s promise (threat?) to impose 25% tariffs on imports from Canada.
The most valuable of those imports is crude oil. We import more than 4 million barrels of Canadian crude daily. Much of that is refined in American refineries and shipped back to Canada in gasoline, diesel and jet fuel.
Like everyone else in America, I am all in favor of tormenting our neighbors to the north — it is an honored American tradition.
Here’s the problem: A tariff on Canadian crude would damage American families and workers. It would disrupt the supply chain American refineries rely on to produce the fuels and products Americans use daily. It is important to remember that there are different kinds of crude oil and that in the wake of the imposition of tariffs, many American refineries would need to adapt their processes to other sources of crude oil. That would take years and cost billions of dollars.
Currently, American refineries are built to process heavier crude oil, while most of the crude oil produced in the United States is light. Light crude oil is not a good replacement for the heavy crude oil we get from Canada and Mexico. Rebuilding the refineries to process light crude oil from the United States would cost billions of dollars and take at least a decade, even if the refiners could get the permits.
Refineries in the Midwest, for example, are almost entirely reliant on crude oil from Canada. Transporting oil from elsewhere — even other parts of the United States — would be difficult and expensive. The refining system is mostly built to use the crude oil nearest the refinery.
Not surprisingly, disrupting the system would increase gasoline prices. GasBuddy’s Patrick De Haan, head of petroleum analysis, told MarketWatch in November that gas prices could increase by 30 to 40 cents per gallon and reach 70 cents per gallon extra.
These increases would be seen almost immediately after the tariffs were imposed. They would be worse in the Midwest — Indiana, Pennsylvania, Wisconsin, Michigan and Minnesota — where refineries rely more on Canadian crude. In the Midwest, Canadian crude accounts for 100% of our oil imports.
We have the best-run and most technologically advanced refineries in the world, as well as the most extensive and well-run pipeline system on the planet. The skill and effort required to draw crude oil from thousands of feet underground, move it across the nation, and refine it into products that consumers need, such as gasoline, diesel, heating oil, plastics, textiles, pharmaceuticals and on and on, is nearly incomprehensible. It is the greatest and most important engineered system the human race has ever created.
But it can’t turn on a dime. Retooling refineries and other parts of the system to address a 25% tariff on Canadian crude oil would take years and billions of dollars.
Team Trump is using the specter of damaging tariffs to frame the renegotiation of the U.S.-Mexico-Canada Agreement. That makes good sense. The treaty needs to be renegotiated. Mexico’s transshipment of goods — especially electric vehicles — from the slaving, genocidal regime in China needs to be disincentivized and stopped.
As every good parent knows, however, the tricky part of a threat-based approach is to avoid getting so far down the road that you must carry through on a threat you may have made but would rather not execute.
• Michael McKenna is a contributing editor at The Washington Times.
Please read our comment policy before commenting.