The Trump administration announced new tariffs on imports from Canada and Mexico on Saturday, sparking concerns of a surge in gasoline prices across the United States. As the tariffs come into effect on Tuesday, Americans brace for an increase in the cost of various imported goods, including cars, lumber, and agricultural products. The energy sector is notably impacted, with tariffs on energy products set at 10%, compared to a 25% tariff on other goods.
Wholesale gasoline prices rose by 8 cents per gallon and diesel by 10 cents in early Monday trading, reflecting market reactions to the upcoming tariffs. Oil futures also climbed by 2% to 3%, further indicating potential price increases at the pump. With the average price of a gallon of gas standing at approximately $3.10 as of Monday, according to AAA, consumers could soon face additional costs.
“We took this step simply because… a 10% rate on energy will minimize any disruptive effects we might have on gasoline and home heating oil prices,” said an administration official.
The diversion of oil exports originally destined for the United States is expected, as shippers redirect supplies to other markets to avoid tariffs. New England, which receives a significant amount of gasoline from Irving Oil's refinery in Saint John, New Brunswick, could see prices climb by 20 cents per gallon due to this supply shift.
“What you are seeing is a great reshuffling of oil about to begin,” according to Lipow.
Lipow further warned that consumers would likely notice changes at the pump within the next five to seven days. Depending on regional factors, prices could rise by as much as 15 cents per gallon.
“You’ll see something at the pump in the next five to seven days. Depending on where you are in the country, it could be up to another 15 cents a gallon.” – Lipow
Despite the tariff-related challenges, February typically sees lower gas prices due to reduced demand. The United States is currently using around 1 million barrels less gasoline per day compared to July. Tom Kloza noted that gas prices remain under $3 in 12 out of 16 states as February begins.
“Interestingly, 12 of those 16 states begin February with an average retail gasoline price under $3 a gallon,” remarked Tom Kloza.
However, if the tariffs persist into the summer months, their impact could extend beyond fuel prices and contribute to broader inflation concerns. Trucking companies might impose fuel surcharges, which could increase the cost of goods across different sectors.
“Expect the bulk of the previously seaborne Canadian and Mexican exports to the US to be rerouted,” predicted Goldman Sachs.
