Oh they’ll shoot up in the US, but I don’t see that happening in Canada. They’re going to be hit with a drop in demand from US refineries and either be forced to cut prices to overcome the tariff, go to other markets, or overproduce.
They might be able to just sell to other markets and not have to cut prices much, though.
The thing is that refineries are designed around refining specific types/qualities of crude. The US produces a lot of light (low viscosity) and sweet (low sulfur) crude oil, but a lot of our refineries are actually set up to refine heavy (high viscosity) and sour (high sulfur) crude, because it’s cheaper to buy and more advanced refineries can make a larger profit on it. And as you might have guessed, most of the crude produced is Canada is heavy sour crude. A lot of the majors/super majors will pump light and sweet US crude and then export a good portion of it overseas to countries that don’t have the same refining capabilities and then buy the cheap and dirty stuff that they know how to handle. I’m not a down stream expert, but I would imagine going from heavy sour crude to light sweet crude is probably going to be costly, even if it’s easier than going in the other direction. What I expect is more likely is that refineries won’t stop buying Canadian crude and will just raise prices, instead.
A big problem is that the Canadian dollar value is tied to oil price. But these tariffs are a different sort of oil price than the standard OPEC pricing. Usually if oil prices go down worldwide, demand for the difficult to refine Canadian oil goes down and our dollar devalues.
If price goes up, then we become more competitive and put dollar strengthens. This new situation is different because it will decrease demand and increase the domestic cost of oil, so our dollar will get weaker AND oil costs will go up in Canada. I think. It will be bad, regardless.
I think the shock it would cause immediately in both countries would shoot prices up
Oh they’ll shoot up in the US, but I don’t see that happening in Canada. They’re going to be hit with a drop in demand from US refineries and either be forced to cut prices to overcome the tariff, go to other markets, or overproduce.
They might be able to just sell to other markets and not have to cut prices much, though.
The thing is that refineries are designed around refining specific types/qualities of crude. The US produces a lot of light (low viscosity) and sweet (low sulfur) crude oil, but a lot of our refineries are actually set up to refine heavy (high viscosity) and sour (high sulfur) crude, because it’s cheaper to buy and more advanced refineries can make a larger profit on it. And as you might have guessed, most of the crude produced is Canada is heavy sour crude. A lot of the majors/super majors will pump light and sweet US crude and then export a good portion of it overseas to countries that don’t have the same refining capabilities and then buy the cheap and dirty stuff that they know how to handle. I’m not a down stream expert, but I would imagine going from heavy sour crude to light sweet crude is probably going to be costly, even if it’s easier than going in the other direction. What I expect is more likely is that refineries won’t stop buying Canadian crude and will just raise prices, instead.
A big problem is that the Canadian dollar value is tied to oil price. But these tariffs are a different sort of oil price than the standard OPEC pricing. Usually if oil prices go down worldwide, demand for the difficult to refine Canadian oil goes down and our dollar devalues.
If price goes up, then we become more competitive and put dollar strengthens. This new situation is different because it will decrease demand and increase the domestic cost of oil, so our dollar will get weaker AND oil costs will go up in Canada. I think. It will be bad, regardless.