The decision by Trump to push more tariffs on Mexico could prove to be painful for oil refineries in US as it is a rich source of crude oil and supplies around 658000 barrels of crude every day to American firms like ExxonMobil, Valero and several others. Refineries like Gulf Coast are dependent on heavy crude oil from Mexico which is purified to make several fuels like diesel, gasoline and also jet fuel. These refineries are facing short supply of heavy oil also due to crackdown of US on Venezuela and if 5 percent hike in tariff is enforced on Mexican oil it will force US refiners to buy heavy oil from other sources that may push up energy prices.
Experts stated that if these tariffs are actually enforced it could be very detrimental to US refiners and will escalate shortage of heavy oil barrels which are already under stress due to Venezuela’s crisis. Though production of American oil extraction firms is at a record high the energy industry’s requirements are complex as it relies on heavy oil while the high quality shale crude is very light. To refine this oil the old refining systems in Gulf Coast blend it with heavy oils to enhance their production.
Till recently these refiners were relying on heavy oil from Venezuela for their requirements but due to sanctions of US administrators that resource has been closed down. While earlier US used to import around 517000 barrels/day a year ago it has not imported a single barrel this week. Though it could have imported from Saudi Arabia that also produced heavy oil but now Saudi has slashed down its shipments to US as part of its agreement with OPEC to boost oil prices. While Canada is already supplying heavy oil it is not enough for needs of US due to shortage of pipelines.