Quote:
Originally Posted by OldDutch
Maybe I need a primer on the economics of this tariff on Oil? Say a barrel of Candaian crude is $50 USD today. 25% tarriff would be 12.50 USD, bringing the purchase price to $62.50 USD to import into the US to send to a refinery.
Now that is assumption that 100% of tariff will be passed on, which it should?
Ok now you can argue that prices Canadian oil out of the US, because cheaper stock can be found elsewhere. Where is that elsewhere?
Texas refineries are built for heavy oil, specifically formulations from Venezuela and Canada. So will this drive more money to that loveable dictator, or will the refineries absorb it. Pass it along, and then hit the end customer?
Is my logic not right? Just seems a commodity that flows through a pipeline that can't just be switched, puts downstream at a disadvantage. If so, what is the problem? This will just shoot Trump in the foot in theory? Especially with the Oil lobby?
Seems like a bluff if what I wrote is remotely correct
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You are correct. The US supply of crude is not easily just replaced. Refining is a low margin business, so the effect will be a proportional increase in consumer cost for fuel. And general inflation for anything that requires transport. It would be an extraordinarily stupid thing for Trump to put a tariff on Canadian oil imports. I don't know what the markets are anticipating, but I would be surprised if people are anticipating tariffs on oil. It's also why Smith is pretty sanguine about the whole thing despite saying all the right things. My guess is she is actually quite confident that oil will be exempted.
Her real issue will become domestic politics if it's exempted.