The oil and gas industry in the United States is bracing for uncertainty as President Donald Trump considers imposing 25 percent tariffs on imports from Canada and Mexico. If implemented, these tariffs could send shockwaves through the oil market, causing disruptions for refiners and potentially leading to higher prices at the pump for millions of Americans. The implications of this move extend far beyond oil executives and investors—it could hit the wallets of everyday consumers, businesses, and industries that rely on stable fuel prices.
While the United States holds the title of the world’s largest oil producer, its refining infrastructure is highly dependent on a mix of crude oil sources, including heavy oil from Canada and Mexico. Roughly 60 percent of U.S. oil imports originate from Canada, with an additional 7 percent coming from Mexico. Many refineries, particularly those in the Midwest and along the Gulf Coast, are configured to process these specific types of crude. A sudden shift away from these sources would not be as simple as flipping a switch—retooling refineries to process different grades of oil is a costly and time-consuming endeavor.
Analysts remain divided on how these tariffs might ripple through the energy market and who would ultimately bear the financial burden. If the tariffs are implemented temporarily or if the administration allows waivers for refiners, the impact could be contained. However, if the measures are enforced broadly and for an extended period, the cost of importing crude oil could skyrocket, and those expenses are likely to be passed down to consumers in the form of higher fuel prices.
President Trump has indicated that the tariffs could take effect as early as Saturday. In a statement made on Thursday, he hinted at the possibility of exempting oil, leaving many industry insiders and financial analysts in a state of uncertainty. The oil and gas sector was one of Trump’s most significant financial backers during the 2024 election cycle, contributing more than $75 million to his campaign. Given his administration’s longstanding commitment to lowering energy costs and supporting fossil fuel industries, there is speculation that the president may reconsider imposing tariffs on crude oil and refined petroleum products.
If Trump moves forward without exemptions, some of the hardest-hit entities will be Canadian oil producers and U.S. refiners that rely on Canadian crude. Midwestern refineries, in particular, process large volumes of heavy crude from Canada and have few viable alternatives. Should they struggle to secure adequate supplies, production cuts could follow, leading to localized fuel shortages and price hikes. Industry experts warn that gasoline prices in the Midwest could rise by as much as 15 to 20 cents per gallon, with smaller yet noticeable increases in other regions.
Energy analysts caution that this situation could create a messy and unpredictable market environment. Historically, the United States has not faced a tariff-driven disruption of this magnitude in the modern era. If refiners are forced to seek alternative crude sources, they may look to countries like Venezuela or Saudi Arabia, but logistical challenges and pricing structures could make this an unfeasible option in the short term.
The refining sector is already facing economic pressures. Over the past two years, demand for diesel in the United States has weakened, leading to lower refining margins. This has taken a toll on major oil corporations, with the financial results of industry giants reflecting these challenges. ExxonMobil reported a slight decline in fourth-quarter earnings, dropping from $7.63 billion to $7.61 billion year-over-year, despite production growth in regions like West Texas. Chevron, on the other hand, saw a 43 percent increase in fourth-quarter profits, reaching $3.24 billion, but the company still failed to meet Wall Street expectations.
The national average price for regular gasoline currently sits at $3.11 per gallon, according to AAA, mirroring prices seen at this time last year. However, should tariffs be enacted, this stability may be short-lived, particularly in regions that rely heavily on Canadian crude imports.
Trump has been vocal about his willingness to use tariffs as a strategic tool to influence global trade dynamics. In his first two weeks in office, he has repeatedly threatened tariffs against U.S. allies to gain leverage in negotiations. A recent example was his decision to impose 25 percent tariffs on Colombia after its president initially refused to accept U.S. military planes carrying deported migrants. Within hours of the tariff announcement, the Colombian government conceded to Trump’s demands, prompting him to withdraw the measure.
The American Petroleum Institute, the leading trade group for the U.S. oil and gas sector, has been urging the administration to exempt fossil fuels from any tariff policies. In a formal letter to the White House, the organization argued that imposing tariffs on crude oil, natural gas, or refined petroleum products would undermine American energy security, disrupt affordability for consumers, and weaken the industry’s global competitiveness.
A fundamental challenge in the oil industry is that not all crude oil is created equal. The majority of oil produced domestically in the U.S. is categorized as light crude, similar in consistency to light beer. In contrast, the crude imported from Canada and Mexico is classified as heavy oil, often compared to thick molasses. The refining process depends on blending these different crude types to produce gasoline, diesel, and other essential fuels. Without access to Canadian and Mexican crude, U.S. refiners could struggle to maintain efficiency, leading to supply shortages and increased costs.
Despite the looming uncertainty, some major oil companies have been proactive in preparing for various potential outcomes. Valero Energy, one of the largest refining firms in the U.S., has stated that it has contingency plans in place. Thanks to its strategically located refineries along the Gulf Coast, the company has the flexibility to import oil from other regions if necessary. However, even with such measures, the industry acknowledges that widespread tariff-driven disruptions could force production cuts, ultimately reducing fuel output and driving prices higher.
Chevron is also undergoing internal restructuring to adapt to shifting market conditions. The company recently recognized $715 million in severance-related expenses in the last quarter of the year, signaling upcoming job reductions. Although Chevron has not disclosed the exact number of employees affected, CEO Mike Wirth acknowledged that workforce changes are on the horizon.
The U.S. oil industry has experienced a 25 percent decline in employment over the past decade, even as crude oil and natural gas production have reached record highs. Should Trump’s tariffs be enacted, further job losses could follow, particularly among refining and logistics workers.
As the situation unfolds, energy executives, economists, and policymakers are watching closely. The administration’s final decision will determine whether the U.S. energy sector faces a temporary disruption or a prolonged period of instability. With fuel prices at stake, both industry leaders and American consumers have much to lose if the tariffs are enforced without exceptions.
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