CERAWeek Haunted by Tariffs and Tanking Oil
The current year’s CERAWeek by S&P Global conference kicked off in U.S. metropolis of Houston on Monday, with the energy sector’s most influential annual forum expected to convene over 450 C-Suite executives, 80 ministers and top officials and more than 10,000 participants from over 2,050 companies across 80 countries and regions. With the theme of "Moving Ahead: Energy strategies for a complex world," CERAWeek 2025 will address challenges related to energy security, supply, developments in markets, infrastructure, policy direction, climate goals and technological innovations. Not surprisingly, tariffs and trade wars have emerged as a major topic of discussion, with experts debating whether tariffs, trade, and competition will replace security, affordability, and sustainability in shaping energy markets and policy.
"We gather at a time of great change, opportunity and unpredictability in energy and in global affairs," S&P Global said in its welcome remarks. "The energy industry is at a crossroads," the forum's organizer added, citing persistent high inflation, weak economic growth, and rising energy costs among drivers of global uncertainty.
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The event is being held at a time when U.S. President Donald Trump has triggered tariff wars with the country’s biggest trading partners. Initially, Trump threatened Canada and Mexico with duties of 25% and China with a 10% levy; however, he now says he’ll double tariffs on Canadian steel and aluminium imports to 50%, escalating a trade war with the United States’s northern neighbour. Trump said his latest move comes in response to a threat by the province of Ontario to put a 25-percent surcharge on electricity exports to some U.S. states. Whereas Trump has delayed most of the tariffs he had imposed on Canada and Mexico, Canada is responding forcefully, with the Canadian government announcing on Monday it would match American tariffs on roughly $30 billion worth of U.S. goods initially, and another $125 billion 21 days later, for a total of $155 billion. Meanwhile, Ontario Premier Doug Ford says he will move forward with a 25% surcharge on electricity exports to three US states starting Monday, and turn off access if the United States adds new tariffs on Canadian goods.
“If they want to try to annihilate Ontario, I will do everything--including cut off their energy with a smile on my face,” Doug Ford told reporters in Toronto, Monday.
Oil flows facing tariffs represent 44% of U.S. oil product imports, 69% of crude oil imports and 81% of heavy crude oil imports. The U.S. imported ~ 6.6 million barrels per day (mb/d) of crude oil in the first 10 months of 2024, of which 4.0 mb/d was heavy oil for use in upgraded refineries with cracking units. Canada provided 75% of U.S. heavy crude oil imports in 2024, with its market share having steadily increased since 2000, squeezing outflows from Mexico, Venezuela and Colombia. Some 80% of Canada's crude production flows downstream to U.S. refiners, with U.S. imports of Canadian crude reaching a record high of 4.42M bbl/day in the week ending January 3, according to the U.S. Energy Information Administration.
Canadians overwhelmingly support retaliatory tariffs, with Bloomberg reporting that 82% support export levies on oil exports if Trump imposes tariffs on Canadian oil. Whereas Canadians traditionally considered export taxes on energy to be politically divisive, the robust backing reveals the level of anger amongst the public over Trump’s actions and gives Justin Trudeau’s government greater license to respond in kind if Trump carries out his threat.
The trade wars loom large at a time when trade volumes between the two countries have been surging. Canada’s energy exports to the United States surged in the latter part of 2024, helping the country record its biggest surplus with its main trading partner since 2022. Crude oil exports jumped amid a weakening Canadian dollar as well as traders stockpiling inventories ahead of Trump’s tariffs. The trade surplus widened to C$11.3 billion in December, up from C$8.2 billion previously while crude exports to the U.S. jumped 11.8% in the final quarter. Nearly 76% of all exports by Canada went to the U.S. compared to 62% of all imports coming from the U.S. Last year, the value of Canada’s imports and exports with the U.S. surpassed the C$1 trillion mark for a third straight year.
By Alex Kimani for Oilprice.com