The looming threat of tariffs on Canadian and Mexican crude oil imports has left many U.S. oil refiners on edge, as their facilities are largely configured to process heavier grades of crude typically sourced from these countries. President Trump’s recent announcement to impose a 10% tariff on Canadian oil, potentially effective February 18th, has the industry seeking clarity and preparing for potential disruptions.
This potential tariff could significantly impact the cost of crude, forcing refiners to potentially reduce processing volumes. Refineries located in the Midwest are particularly vulnerable, as they process approximately 70% of the 4 million barrels per day (bpd) of crude imported from Canada.
Phillips 66, a major U.S. refiner, has warned of potential production cuts in the Midwest and Rocky Mountain regions, where access to alternative crude supplies is limited. The company anticipates that the 457,000 bpd of Mexican crude currently imported into the U.S. could be diverted to other markets, such as Europe or Asia.
“We would expect to see heavy crudes firm up a bit simply due to logistical inefficiencies,” commented Brian Mandell, Executive Vice President of Marketing and Commercial at Phillips 66. “As the year progresses and OPEC increases supply, we anticipate these price differentials to widen again.”
Data from TD Cowen reveals that Phillips 66, along with HF Sinclair and Par Pacific Holdings, have significant exposure to Canadian crude. Other major refiners are also actively preparing contingency plans.
“Our commercial and optimization teams are diligently exploring every possible scenario and developing corresponding responses,” stated Gary Simmons, Chief Operating Officer of Valero Energy, the second-largest U.S. refiner by capacity. “Throughput could potentially decrease by 10%. The ultimate impact depends on the duration and severity of the tariffs, particularly concerning heavy crude processing.”
While HF Sinclair, Par Pacific, and Marathon have not yet issued public statements, the potential impact on their operations is significant. The table below details the volume of crude oil imported from Canada and Mexico by major U.S. independent refiners in November 2024, highlighting the extent of their reliance on these sources.
| Refiner | Canada (thousands of barrels) | Mexico (thousands of barrels) |
|---|---|---|
| HF Sinclair | 5,060 | |
| Phillips 66 | 14,481 | 497 |
| Par Pacific | 1,356 | |
| Marathon | 15,535 | 1,488 |
| Valero | 1,147 | 6,599 |
Source: U.S. Energy Information Administration (Data released January 31, 2025)
In conclusion, the proposed tariffs on Canadian and Mexican crude oil imports present a significant challenge for U.S. refiners. The potential for reduced throughput, increased crude costs, and logistical disruptions could have a substantial impact on the industry. The situation remains fluid, and refiners are closely monitoring developments and preparing for a range of potential outcomes. The ultimate impact will depend on the final implementation of the tariffs and the ability of refiners to adapt to the changing market dynamics.
