Canadian producers are likely to feel the primary impact of tariffs, according to one energy trader.
An executive order from U.S. President Donald Trump took effect as of 12:01 ET Tuesday, that placed a 25 per cent across-the-board tariff on products form Canada and Mexico, with a 10 per cent levy on Canadian energy.
Rebecca Babin, senior energy trader at CIBC Private Wealth, said in an interview with BNN Bloomberg Tuesday that the market is still trying to “get its head around” tariffs and how long they might be in place. She added that U.S. consumers will bear some of the higher costs for crude oil driven by tariffs, while the “primary blow is going to be dealt to the Canadian producers.”
“That’s really because there’s no real other outlet for the heavy WCS (Western Canada select) crude to go. You can send some of it through the pipelines to Asia, but there’s no other way to move your crude outside of Canada,” Babin said.
Given the current circumstances, she said WCS gets discounted to WTI (West Texas Intermediate), which is something that’s already taken place to a large degree.
“If we put on these tariffs, it’s around a US$15 to $16 discount to WTI when there’s no tariffs, that discount is closer to $10 to 12. So, the market’s already priced in the fact that they’re going to kind of take the brunt of this, take the lower price and get the crude into the U.S.”
She added that some refineries in the U.S. will bear some of the cost, with a smaller portion being passed on to the U.S. consumer.
