Oil Prices Expected to Rise Temporarily Following Tariff Implementation
Crude oil prices are expected to increase temporarily due to new tariffs imposed by President Trump on Canada, Mexico, and China. However, industry experts predict that prices will ultimately decline as market adjustments occur.
While crude markets will see higher prices and consumers will be forking out more for gasoline and diesel costs in the near term, the spike is only temporary, said oil watchers whom CNBC spoke to.
Oil prices are likely to fall in the longer run after the initial jump following President Donald Trump's implementation of hefty tariffs on Canada, Mexico, and China, said industry watchers.
Over the weekend, Trump followed through on his long-threatened 25% tariffs on imports from Canada and Mexico, as well as a 10% duty on goods from China. Energy resources from Canada will be subject to a lower 10% tariff.
The U.S. West Texas Intermediate rose 1.75% to $73.8 per barrel, while U.S. gasoline futures also climbed. RBOB Gasoline futures were last up 2.81% at $2.11 per gallon. International Brent crude climbed 0.71% to $76.21 per barrel.
According to the latest data from the U.S. Energy Information Administration, America's imports of Canadian crude oil reached a record 4.3 million barrels per day in July 2024, following the expansion of Canada's Trans Mountain pipeline. Canada made up about 62% of all U.S. crude oil imports in the first 10 months of last year, while Mexico accounted for about 7% during the same period.
While crude markets will see higher prices and consumers will be forking out more for gasoline and diesel costs in the near term, the spike is only temporary, oil watchers told CNBC.
"While the initial move on crude oil is upward, a cycle of tariffs and retaliatory actions by Canada, Mexico, China, and perhaps others in the future could lead to a worldwide recession, causing oil prices to plummet," Andy Lipow, President of Lipow Oil Associates told CNBC.
The tariffs have not resulted in any oil supplies being taken off the market and will result in a redistribution of supplies as Mexico and Canada look to divert their volumes to Europe and Asia, Lipow added. Meanwhile, U.S. refiners will be looking to process more domestic crude oil while seeking Middle East alternatives.
