Sign In or Create an Account.

By continuing, you agree to the Terms of Service and acknowledge our Privacy Policy

Podcast

The Trump Policy That Would Be Really Bad for Oil Companies

Jesse and Heatmap deputy editor Jillian Goodman talk Canadian tariffs with Rory Johnston.

Canadian oil production.
Heatmap Illustration/Getty Images

On February 1 — that is, three days from now — President Donald Trump has promised to apply a tariff of 25% to all U.S. imports from Canada and Mexico, crude oil very much not excepted. Canada has been the largest source of American crude imports for more than 20 years. More than that, the U.S. oil industry has come to depend on Canada’s thick, sulfurous oil to blend with America’s light, sweet domestic product to suit its highly specialized refineries. If that heavy, gunky stuff suddenly becomes a lot more expensive, so will U.S. oil refining.

Rory Johnston is an oil markets analyst in Toronto. He writes the Commodity Context newsletter, a data-driven look at oil markets and commodity flows. He’s also a lecturer at the University of Toronto’s Munk School of Global Affairs and Public Policy and a fellow with the Canadian Global Affairs Institute and the Payne Institute for Public Policy at the Colorado School of Mines. He previously led commodities market research at Scotiabank. (And he’s Canadian.)

On this week’s episode of Shift Key, Jesse and Jillian attempt to untangle the pile of spaghetti that is the U.S.-Canadian oil trade. Shift Key is hosted by Jesse Jenkins, a professor of energy systems engineering at Princeton University, and Jillian Goodman, Heatmap’s deputy editor. Robinson Meyer is off this week.

Subscribe to “Shift Key” and find this episode on Apple Podcasts, Spotify, Amazon, or wherever you get your podcasts.

You can also add the show’s RSS feed to your podcast app to follow us directly.

Here is an excerpt from our conversation:

Jesse Jenkins: I want to come back to what would happen if Trump did impose these tariffs, but before we get there, I think it’d be helpful just to understand a little bit more about what life looks like on either side of the border.

You mentioned that Canada has become dependent on the U.S. market for export. My understanding is that the refineries in the Midwest — because they are now used to just using a single source of crude rather than, say, a coastal refinery that might have to be more flexible because they could get crude from Venezuela one day and from Saudi Arabia another day, or something with different qualities. My understanding is that the refineries in the Midwest have become pretty specialized and optimized around refining specifically Canadian crude. Is that correct? And if so, what, what are the features there? How challenging would it be for refiners to switch to other supply in the U.S. if all of a sudden Canadian crude becomes 25% more expensive?

Rory Johnston: Yeah, and you’re absolutely right. So — and I had mentioned earlier, that one aspect of this entrenched relationship is this physical infrastructure, and this other point is this business mode optimization around the specific blend of crude.

Now, for those that aren’t aware, crude oil is not one thing. It is an endless cornucopia soup of hydrocarbons that, generally, we can divide along a two-part axis. On the one hand you have gravity or density, or weight of the crude. And then the other side you have sulfur concentration. Sulfur concentration is always bad because, you know, sulfur’s bad — acid rain, we want to get rid of that. So that costs money to extract. And then the density or the gravity, we talk about this in API gravity. The U.S. crude, like shale crude — that’s often what we call light, tight oil — is often 40 degrees API gravity or higher. It’s very, very, very light. That’s lighter even than WTI, the benchmark itself, whereas Canadian Western Canada select, which is the kind of primary export blend of Canadian crude, is at 22 degrees gravity. Way, way, way, way heavier. One of the heaviest major marketed crudes in the world and the largest, heaviest, marketed grade in the world in terms of size of the particular flow.

So what happens is, well, when you look at the actual blend that is consumed by U.S. refineries, it’s not that they consume a heavy blend of crude. Their blended refinery slate is more of a medium grade. But they have so much light crude, particularly from areas like the North Dakota Bakken, that they need heavy crude to blend and get that kind of medium grade in the middle.

So — to your point, though — that needs to happen. And particularly if you want to, let’s say, keep consuming more U.S. domestic crude in the United States, then you need heavy crude to blend with it to meet those refinery specifications.

This episode of Shift Key is sponsored by …

Intersolar & Energy Storage North America is the premier U.S.-based conference and trade show focused on solar, energy storage, and EV charging infrastructure. To learn more, visit intersolar.us.

Music for Shift Key is by Adam Kromelow.

Yellow

You’re out of free articles.

Subscribe today to experience Heatmap’s expert analysis 
of climate change, clean energy, and sustainability.
To continue reading
Create a free account or sign in to unlock more free articles.
or
Please enter an email address
By continuing, you agree to the Terms of Service and acknowledge our Privacy Policy
Politics

Trump Opened a Back Door to Kill Wind and Solar Tax Credits

The Senate told renewables developers they’d have a year to start construction and still claim a tax break. Then came an executive order.

Trump burning a calendar.
Heatmap Illustration/Getty Images

Renewable energy advocates breathed a sigh of relief after a last-minute change to the One Big Beautiful Bill Act stipulated that wind and solar projects would be eligible for tax credits as long as they began construction within the next 12 months.

But the new law left an opening for the Trump administration to cut that window short, and now Trump is moving to do just that. The president signed an executive order on Monday directing the Treasury Department to issue new guidance for the clean electricity tax credits “restricting the use of broad safe harbors unless a substantial portion of a subject facility has been built.”

Keep reading...Show less
Sparks

Trump Says He’s Going to Slap a Huge Tariff on Copper

“I believe the tariff on copper — we’re going to make it 50%.”

Donald Trump.
Heatmap Illustration/Getty Images

President Trump announced Tuesday during a cabinet meeting that he plans to impose a hefty tax on U.S. copper imports.

“I believe the tariff on copper — we’re going to make it 50%,” he told reporters.

Keep reading...Show less
Green
Climate

The Only Weather Models That Nailed the Texas Floods Are on Trump’s Chopping Block

Predicting the location and severity of thunderstorms is at the cutting edge of weather science. Now funding for that science is at risk.

Texas flooding.
Heatmap Illustration/Getty Images

Tropical Storm Barry was, by all measures, a boring storm. “Blink and you missed it,” as a piece in Yale Climate Connections put it after Barry formed, then dissipated over 24 hours in late June, having never sustained wind speeds higher than 45 miles per hour. The tropical storm’s main impact, it seemed at the time, was “heavy rains of three to six inches, which likely caused minor flooding” in Tampico, Mexico, where it made landfall.

But a few days later, U.S. meteorologists started to get concerned. The remnants of Barry had swirled northward, pooling wet Gulf air over southern and central Texas and elevating the atmospheric moisture to reach or exceed record levels for July. “Like a waterlogged sponge perched precariously overhead, all the atmosphere needed was a catalyst to wring out the extreme levels of water vapor,” meteorologist Mike Lowry wrote.

Keep reading...Show less
Blue