U.S. Refiners Wanted Oil Imports Exempted From Mexico Tariffs

U.S. refiners and motorists may have dodged a bullet after the U.S. suspended indefinitely the threat to impose tariffs on all imports from Mexico after reaching a deal on immigration with its southern neighbor.

Since a week before Friday, June 7—when President Donald Trump said that the tariffs that would have entered into force on June 10 are indefinitely suspended—oil industry executives and lobbyists have been frantically urging state officials from the White House to the Commerce Department to the Treasury to reconsider the tariffs on imports of crude oil from Mexico.    

Gulf Coast refineries import heavy oil from Mexico to blend with the lighter oil to produce gasoline and other refined oil products. The tariffs that President Trump threatened at the end of May would have meant that U.S. refiners would pay more for the heavy crude from Mexico in a global market that is already short of heavy oil with the U.S. sanctions on Iran and with the sanctions on Venezuela, which resulted in U.S. imports from the Latin American country plunging from 603,000 bpd for the week ending January 25 to just 12,000 bpd for the week ending May 31.

So executives and lobbyists were busy working for a week toward some kind of solution or compromise and called for crude oil imports to be exempted from the tariffs on Mexico.

Last year, U.S. crude oil imports from Mexico averaged 665,000 bpd and accounted for most U.S. energy imports from Mexico, according to EIA data. Mexico was the source of 9 percent of U.S. imported crude oil, America’s third-biggest foreign oil supplier, behind only Canada and Saudi Arabia.  

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Chet Thompson, President and CEO of the American Fuel & Petrochemical Manufacturers (AFPM), said in a statement right after the Trump Administration announced tariffs on products made in Mexico:

“Imposing tariffs on Mexican products, particularly crude oil, could raise energy prices for U.S. consumers, disadvantage the U.S. refining industry and jeopardize passage of USMCA — all bad outcomes. We thus urge the President not to pursue energy tariffs against one of our most important trading partners.”

In the week when tariffs on Mexican goods were on the table and imminent, lobbyists were busy explaining to the administration that tariffs on Mexican crude oil in a tight heavy crude market would mean rising gasoline prices just at the start of the summer driving season, a refinery lobbyist told Reuters last week.

By Tsvetana Paraskova for Oilprice.com

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