President Donald Trump’s escalating trade war with Canada has a nuclear option. Though it’s highly unlikely, Canadian officials could send the tariff battle into overdrive by raising the possibility of weaponized oil and gas levies. But officials and economists on both sides of the border are warning that a clash of tariffs on oil and gas between the neighboring nations could be “devastating” and push their intertwined economies to the brink.
Canada has already hit back with “targeted” counter-tariffs to “level the playing field” after Trump rolled out new duties on cars, steel and other imported goods last month. But Canada has even more leverage that could be potentially crushing for Americans. Trump would likely retaliate with more punishing tariffs on oil and gas exports, but the pain would be especially acute in the United States.
Americans, already in the grips of an affordability crisis, would likely end up with sky-high prices for gasoline, jet fuel and virtually any good that relies on them. The president, meanwhile, claims the U.S. doesn’t even need Canada. He says an ungrateful Canada “thinks it’s a state” as he dangles threats of making it the nation’s 51st.
In reality, the U.S. is deeply reliant on a steady and predictable flow of oil from its northern neighbor. The U.S. is the largest buyer of Canadian crude oil, accounting for 90 percent of its crude exports last year. Canada exports roughly 4 million barrels per day to the U.S., or about 20 percent of America’s daily consumption.
By comparison, the U.S. only exports about 400,000 barrels of crude to Canada per day, or roughly 10 percent of what Canada sends. Any loss in either direction would be enough to see gas prices spike during politically volatile midterm elections with the cost of living at the center of nationwide campaigns. That is a huge amount of U.S. daily consumption that would be impacted, according to Paasha Mahdavi, an oil and gas policy expert and associate professor of political science at UC Santa Barbara.
The problem is, Canada could sell that oil anywhere,” he told The Independent. Oil refineries dotting the U.S. Gulf Coast have expanded over the last several decades to process imported heavy crude from Venezuela and Mexico, making them also well-suited to process similarly heavy crude from Alberta oil fields as Canadian production expanded.
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