OPEC+ Could Save US From Tariff Gas Price Hikes
25% tariffs on imports from Canada and Mexico are supposed to drive gas prices up because the tariffs cover oil. Canada exports a huge amount of oil to the US. Specifically, about 90% of Canada’s crude exports come to America.
In theory, the tariffs should drive up the price of oil. That, in turn, would move gas prices higher. However, there is a wrinkle. OPEC+ will start to raise production in April. “Opening the taps in countries such as Saudi Arabia and Russia, which have voluntarily throttled supply to prop up prices, increases the risk that the world could soon find itself with more oil than it needs,” the New York Times reports.
Good News, Bad News
There is good news and bad news. The oil tariff on Canada’s exports will not hurt US gas prices as much as feared because of the OPEC decision. However, crude prices could drop, and with them, oil company profits. It is too early to tell if the US will drive up the pace of its huge oil supply production to cut the margins of OPEC oil. That chess game won’t start for months.
OPEC+ Production
The OPEC+ decision shows how difficult it is to forecast oil prices in a world awash with crude. President Trump has opened more land for drilling. “Drill baby drill” combined with the OPEC+ decision could trigger drops in profits for both exporting nations and the world’s biggest oil companies.
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