Oil and gas companies in the United States are bracing for the possibility that President Trump will thrust their businesses into disarray and will drive up prices at the pump by imposing 25 percent tariffs on goods from Canada and Mexico.
The United States is the world’s largest oil producer, but the country’s refineries are designed to turn a mix of different types of oil into fuels like gasoline and diesel. Roughly 60 percent of the oil that the United States imports comes from Canada, and about 7 percent comes from Mexico. Many refineries are set up to use those imports and cannot easily switch to oil from other places.
Analysts are not sure just how Mr. Trump’s tariffs might ripple through the oil market — and who would bear the added expenses. The costs may not be significant if the tariffs are in place only temporarily, or if the administration makes it easy for refiners to obtain waivers to keep buying Canadian or Mexican crude without paying extra.
Mr. Trump has said that the tariffs would go into effect on Saturday. On Thursday, he suggested that he might exempt oil.
The oil and gas industry was one of the biggest supporters of Mr. Trump during the 2024 election, giving more than $75 million to his campaign, and the president has made helping the industry and lowering energy costs for consumers key policy priorities.
Among those likely to take a hit if Mr. Trump does not exempt fossil fuels are Canadian oil producers and U.S. refiners, particularly those in the Midwest that process a lot of Canadian oil and lack a ready substitute. American consumers in regions that depend on oil from Canada also could see slightly higher prices at the pump, particularly if fuel makers were to respond by cutting production. Gasoline prices in the Midwest could climb 15 to 20 cents a gallon, with more muted effects in other parts of the country, said Tom Kloza, global head of energy analysis at Oil Price Information Service.
“It’s going to be very, very messy” if Mr. Trump moves ahead with tariffs, Mr. Kloza said. “We haven’t dealt with something like this, certainly not in the modern era.”
Already, refining is a tougher business than it was a couple of years ago, partly because U.S. demand for diesel has weakened.
Lower profit margins in fuelmaking weighed on the fourth-quarter results of the two largest U.S. oil companies, which reported earnings on Friday.
Exxon’s profit for the final three months of the year inched lower to $7.61 billion, from $7.63 billion a year earlier. Production growth in places like West Texas helped to offset a more challenging market for refining. The company’s results exceeded forecasts from analysts surveyed by FactSet.
“We have done the hard work to make sure that we’re competitively advantaged, and that’s going to hold us in good stead in any market environment,” Kathy Mikells, Exxon’s chief financial officer, said.
Chevron’s fourth-quarter profit rose around 43 percent year-over-year, to $3.24 billion, but it came up short of Wall Street’s expectations.
The average price of regular gasoline on Friday was $3.11 a gallon nationally, according to AAA, the motor club, in line with prices this time last year. In the Midwest, gasoline is generally cheaper than the national average.
Mr. Trump, in his first two weeks in office, has repeatedly invoked the threat of tariffs. Some policy analysts say that he is using the threats as a negotiating tool to spur countries to do what he wants. Last weekend, he announced 25 percent tariffs against another U.S. ally, Colombia, after its president balked at accepting U.S. military planes carrying deported immigrants. Within hours, Colombia acceded and Mr. Trump reversed course.
The American Petroleum Institute, the oil and gas industry’s main trade group, has urged the administration to exempt fossil fuels from any tariffs.
“Tariffs on crude oil, natural gas, or refined products would directly undermine energy affordability and availability for consumers while eroding the U.S. oil and natural gas industry’s competitiveness both domestically and globally,” the group wrote in a December letter.
Most oil produced in the United States is, in the telling of industry experts, akin to a light beer, while the crude imported from Canada and Mexico is more like a thick molasses. Refineries are set up to make gasoline, diesel and other products out of a combination of the two, commonly referred to as light oil and heavy oil.
U.S. fuel makers did not appear to be stocking up on Canadian oil, Mr. Kloza of OPIS said.
Valero Energy, one of the largest U.S. oil refining companies, has been planning for a wide range of scenarios and has flexibility because many of its refineries are along the Gulf Coast, near ports where oil can be imported from around the world, Gary Simmons, the chief operating officer, told financial analysts on a conference call on Thursday.
Eventually, though, the company might need to cut production if buying heavier oil like the kind produced in Canada and Mexico were to become difficult, Mr. Simmons added.
Chevron also said on Friday that it recognized $715 million in severance charges in the final three months of the year, signaling job cuts on the horizon.
“We’ll see some organizational restructuring, and that will result in some changes to our work force,” Mike Wirth, the company’s chief executive, said in an interview. Chevron has not disclosed how many employees could be affected.
Employment in the U.S. oil industry has fallen roughly 25 percent over the past decade, even as oil and gas production have soared to record highs.
