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The American oil industry wasn’t built for Canadian tariffs.
Since his re-election, President Trump has repeatedly threatened to impose big tariffs on imports from Canada and Mexico.
And in recent days, he’s made it clear: Yes, he really means all imports.
“We don’t need them to make our cars, we make a lot of them. We don’t need their lumber because we have our own forests,” he told Davos attendees last week. “We don’t need their oil and gas, we have more than anybody.”
The president is mistaken about the American fossil fuel industry — at least in its current structure. Even though the United States is the world’s No. 1 producer of oil and natural gas, the industry really does depend on oil imported from its neighbors, especially Canada. If Trump makes good on his threats to tariff oil imports from Canada and Mexico, then he will cost the American oil and gas industry tens of billions of dollars while causing gasoline prices to rise across much of the country.
That’s because not all petroleum is created equal. The type of crude that oozes out of wells in Alberta and Saskatchewan is not identical to what’s extracted by frackers in Texas and Oklahoma. But the types of petroleum now produced in Canada and in America pair especially well together — meaning that if the price of Canadian oil goes up, then American refineries, as well as American consumers, will pay the price.
That could hurt the president’s ability to fulfill one of his core promises. In his inaugural address, Trump promised to “rapidly bring down costs and prices” in part by fighting “escalating energy costs.” Levying tariffs on Canadian oil imports would likely raise energy prices.
But it could have more complicated environmental effects. Western Canadian petroleum has a higher carbon intensity than other crude oils, and American climate activists fought last decade to keep it from entering the United States. Trump, counterintuitively, could succeed more thoroughly than they did.
To understand why, you have to know a little bit of chemistry — and a bit of history, too.
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We often talk about oil as an homogenous and fungible commodity, but that’s not really true. In reality, oil and natural gas usually come out of the ground as a slurry of hydrocarbons.
A hydrocarbon is a chain of hydrogen and carbon atoms bonded together. Sometimes those chains are relatively short — as in methane, the major component of natural gas — and sometimes they’re longer — as in octane, a liquid and a major component of gasoline. As the number of carbon atoms keeps growing, the substance starts to get waxier until the chains get absolutely enormous and become the kind of molecule you find in coal. Nitrogen, oxygen, and sulfur atoms are sometimes jammed into the hydrocarbon chains too.
In other words, all fossil fuels exist on a spectrum — and crude oil, a melange of hydrocarbons of different lengths and properties, occupies the messy middle. Those properties can vary based on how and why in the past a crude field formed. Petroleum engineers classify it along two axes:
American fracking wells tend to produce light, sweet crude. The oil from Alberta is heavy and sour.
Normally, heavy and sour oil trades at a discount compared to light and sweet oil. That’s because the highest volume products that come out of a refinery — gasoline or jet fuel, for instance — are made of short hydrocarbons, not long ones. Light, sweet crudes are closer to the finished product, and thus require less refining.
Yet heavy, sour crudes are crucial to the U.S. oil industry anyway. American refiners use heavy crudes to bring down their input costs for refined products such as gasoline, diesel, and jet fuel.
Why? That’s where the history comes in.
Nearly two decades ago, as oil prices reached painful highs as global demand outstripped supply, many refineries across the United States began to invest in technologies that would let them break down heavier, sour petroleum into something more commercially viable. They built coking refineries, expensive pieces of equipment that use extreme heat to break down long hydrocarbon chains into shorter ones. The cost of such a refinery can exceed $10 billion. Many were purpose-built for breaking down the sludgy, sour oil coming from Canada.
In the early 2010s, as the fracking revolution turned the United States into an oil-drilling superpower, those coking refineries remained important. They helped stretch the value out of the light, tight crude coming out of fracking wells, Rory Johnston, an oil markets analyst and the author of the Commodity Context newsletter, told me last week.
It does not make sense to use the coking refineries on oil from fracking wells, because that oil is already largely composed of short-chain hydrocarbons. But by breaking down Canadian oil in coking refineries, and blending it with American oil, the industry can make a wider blend of producers at a lower cost.
“Heavy crude’s cheaper, and they want to refine this into valuable end products,” Johnston said in a separate conversation recorded this week on Heatmap’s Shift Key podcast. “And so because of this, to just run light crude through that, you would instantly render economically worthless all of this very, very expensive equipment.”
Many of America’s refineries — especially those in the Midwest — are now tuned specifically to process light fracking oil and heavy Canadian sludge together, he said. What this means in practice is that the United States exports as a finished product much of the crude oil that it imports from Canada. Under the current situation, the U.S. earns more money selling refined products made from Canadian crude than it spends importing raw petroleum from Canada, Johnston added.
Tariffs will collapse the price relationships that allow for that mutually beneficial situation to persist. It will boost the cost of Canadian oil by at least $5 a barrel on each side of the border, raising pump prices by about 13 cents in the Midwest, Johnston told me.
That may not sound so bad for consumers. But it would be terrible for refiners. “The total effect of Trump’s actions so far is to nuke the economics of U.S. coking refineries. It’s truly magnificent,” he said. “You couldn’t create a better scenario to destroy the economics of U.S. coking refineries.”
If U.S. oil companies lose access to cheap Canadian oil, they will struggle to replace it. That’s because the next best place to get heavy, sour crude is Mexico — and Mexican imports, too, would likely face 25% tariffs under most scenarios where Canada is levied. The next places to get heavy, sour crude are Venezuela (where the Trump administration wants to tighten sanctions) and Colombia (where Trump nearly imposed tariffs last weekend).
One reason Canadian oil is so cheap in the United States is that companies have invested billions integrating the two countries’ oil infrastructure. A network of pipelines and storage tanks bring millions of barrels of oil from Canada down to the U.S. Gulf Coast every day. The countries — and especially their fossil fuel industries — are interdependent.
Meanwhile, only one pipeline system — the Trans Mountain pipeline — connects Alberta’s oil fields to the Pacific coast.
If you begin to play out how each country might react to a tariff, Johnston said, “you get into these completely absurd scenario discussions,” Johnston said. “The result is everyone would be poorer in that scenario.”
None other than the U.S. oil industry itself has opposed the tariffs.
“We import a lot of oil from both Mexico and Canada, and we refine it here in the most sophisticated refinery system in the world,” Mike Sommers, the CEO of the American Petroleum Institute, said at an event in Washington last week. “We’re going to continue to work with the Trump administration on this so that they understand how important it is that we continue these trade relationships.”
On Monday, The Wall Street Journal reported that some Trump aides are eager to hit Canada and Mexico with tariffs this weekend, even though the president has yet to reopen talks — or even describe his demands — for a reworked U.S.-Mexico-Canada free trade agreement. Canadian and Mexican officials have said that they are not sure what Trump actually wants in the talks.
One irony of this fracas is that the tariffs would have a more uncertain environmental effect. Western Canadian crude is unusually carbon-intensive to extract and refine. If its price rose — or if Canadian officials responded to tariffs in part by shutting down production — then Trump could accidentally, if marginally, decrease carbon emissions. American refineries might also respond to tariffs by importing heavy, sour crude oil from abroad, essentially just shifting production around the planet.
Still, it remains ridiculous that Trump, who has spent his first days in the White House attacking a “Green New Deal” agenda that never actually passed Congress, might succeed in raising the cost of oil consumption and production in the U.S. where a decade of climate activism has largely failed.
Perhaps that’s why many still doubt it would happen. On Wednesday morning, President Claudia Sheinbaum of Mexico said that she did not think Trump would ultimately impose sanctions on her country. And even within the oil industry, tariffs on Canadian oil seem unthinkable. A 25% tariff would whack the industry hardest, even though it has allied itself closely with Trump. Trump’s likely energy secretary, Chris Wright, is the CEO of Liberty Energy, an oilfield services company.
“A lot of the people I’m hearing on the Canadian side are saying, ‘Maybe we should try to speak with these people around Trump. Maybe Wright or [Trump’s energy czar Doug] Burgum understand what’s happening,’” Johnston said.
But Trump has already made demands that strike the North American oil industry as bizarre. At the same Davos meeting where he said the United States didn’t need Canadian oil, Trump demanded that OPEC and Saudi Arabia cut global oil prices so that global interest rates could fall. Such a move would cut profits in the American oil industry while hampering Trump’s goal of increasing U.S. oil production.
The irony that a Republican president would push off Canadian crude to increase America’s reliance on OPEC is hard to comprehend, Johnston said.
“I don’t know that anyone has a great sense of where Trump’s true philosophical anchor is,” he said, “other than that we are now getting a clear picture that he views any and all trade deficits as a sin unto themselves.”
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Rob and Jesse revisit the basics of the ultra-clogged electricity interconnection queue.
Shift Key is off for Labor Day, so we’re running this classic episode.
The power grid is straining as new data centers, factories, and electric vehicles come online. For the first time in 15 years, American electricity demand is rising again.
The easiest option is to meet that new demand with new supply — new power plants. But in many parts of the country, it can take years to hook up new wind, solar, and batteries to the grid. The reason why is a clogged and broken system called the interconnection queue.
On this week’s episode of Shift Key, which first aired in 2024, Jesse and Rob speak with two experts about how to understand — and how to fix — what is perhaps the biggest obstacle to deploying more renewables on the U.S. power grid.
Tyler Norris is a doctoral student at Duke University’s Nicholas School of the Environment. He was formerly vice president of development at Cypress Creek Renewables, and he served on North Carolina Governor Roy Cooper’s Carbon Policy Working Group. Claire Wayner is a senior associate at RMI’s carbon-free electricity program, where she works on the clean and competitive grids team.
Shift Key is hosted by Robinson Meyer, the founding executive editor of Heatmap, and Jesse Jenkins, a professor of energy systems engineering at Princeton University.
Subscribe to “Shift Key” and find this episode on Apple Podcasts, Spotify, Amazon, YouTube, or wherever you get your podcasts.
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Here is an excerpt from our conversation:
Robinson Meyer: So, Tyler, you’ve been proposing on Twitter — or on X, I suppose — kind of one weird trick that would improve the interconnection process and make us deploy a lot more clean energy faster and save people the billions of dollars we were just talking about.
What is it? Please enlighten us.
Tyler Norris: So as mentioned, Texas is adding clean electricity much faster than every other market — and not just clean electricity, every form of generation capacity you can imagine. And the reason they’re able to do that is because they’re not subjecting those generators to all those severe conditions that I mentioned earlier and then allocating the cost of upgrading the grid to those generators upfront.
Instead, they’re attempting to proactively plan the system in response to generators that show up and send that market signal regarding where there may be opportunities to upgrade the grid. And it works, of course, because Texas is an energy-only electricity market, so they’re not studying the projects for their capacity value, so there’s some simplifications that make it more viable.
That said, even outside ERCOT, there’s a lot we could do to make this what we call energy-only interconnection option more viable for generators, and I think it could offer a lot of benefits. It’s much lower cost. It’s much faster to get projects online. It can contribute to production cost savings. It also provides a reserve of generators that can be upgraded to capacity resources if and when network capacity becomes available. And it can actually contribute to reliability and reduce the risk of shedding load during reliability events, even though they’re not formally qualified as what we call capacity resources
Meyer: Can you give us an example of what you mean? What is ERCOT actually doing here?
Norris: So it means that the Texas grid operator is willing to curtail generators as necessary to avoid any reliability impacts on the system. And so they’re basically, they’re managing the system in real time. And this does lead to a higher rate of curtailment on average for especially some of these renewable generators. And so that’s an important dimension of it. But there’s a lot of nuance there, too. Even the capacity resources outside of Texas can be curtailed during congestion events.
So they’re not assigning grid upgrades to the projects upfront. They’re instead looking at where the generators show up and connect to the system and then identifying the most valuable grid upgrades from a cost and a reliability standpoint and prioritizing those.
Mentioned:
Tyler’s study on “energy only” interconnection rules
Matthew Zeitlin on the big problems with PJM — and on Tyler’s research into flexible loads
FERC Order 2023 on Improvements to Generator Interconnection Procedures and Agreements
Advanced Energy United report on “Unlocking America's Energy: How to Efficiently Connect New Generation to the Grid
NRDC: “PJM’s Capacity Auction: The Real Story”
Rob’s downshift; Jesse’s upshift.
This episode of Shift Key is sponsored by …
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Music for Shift Key is by Adam Kromelow.
On Trump’s latest wind target, new critical minerals, and methane maps
Current conditions: In the Atlantic, Tropical Storm Fernand is heading northward toward Bermuda • In the Pacific, Tropic Storm Juliette is active about 520 miles southwest of Baja California, with winds of up to 65 miles per hour • Temperatures are surging past 100 degrees Fahrenheit in South Korea.
Renewable investments dim in the U.S.Brandon Bell/Getty Images
In the United States, investments in renewable energy fell by 36% — equal to $20.5 billion — compared to the second half of last year, according to new data from the consultancy BloombergNEF. The drop “reflects a rush of construction toward the end of last year as developers sought to lock in lucrative tax credits, followed by a sharp drop this year as policy conditions worsened,” the report stated. The European Union, on the other hand, ratcheted up spending on renewables by 63% — or nearly $30 billion — in the first half of this year compared to the second half of 2024. Drawing an even sharper contrast, investments into both onshore and offshore wind made up the bulk of the growth in Europe as the Trump administration has placed the harshest restrictions on wind turbines of any other energy source.
Overall, global investment into clean energy rose 10% in the first half of 2025 compared to the same period in 2024. That included a worldwide increase in wind investments of 24% and a jump in new solar investment of 5%.
The U.S. Geological Survey released its latest list of critical minerals on Monday. The report highlights some shifts in U.S. production and concerns in Washington over potential supply disruptions from supposedly friendly powers. While the analysis identifies China as the biggest threat to the U.S. economy in 46 of the 84 commodities studied, “Canada and South Africa both show up as potential points of disruption across eight imports,” Farrell Gregory, a non-resident fellow at the Foundation for American Innovation, wrote on X. “Interestingly, Canada is identified as having a high-risk for disruption, more than South Africa and Russia.”
There were new bright spots in the report. The USGS removed tellurium, a silvery brittle metal used in semiconductors, from the list of risk resources it was added to in 2022. That’s because a new Rio Tinto mine transformed the U.S. from an importer into a net exporter in recent years.
It could have been worse. The Treasury guidance issued Friday dictating what wind and solar projects will be eligible for federal tax credits could have effectively banned developers from tapping the write-offs set to start phasing out next July. In the weeks before the Internal Revenue Service released its rules, GOP lawmakers from states with thriving wind and solar industries, including Senators John Curtis of Utah and Chuck Grassley of Iowa, publicly lobbied for laxer rules as part of what they pitched as the all-of-the-above “energy dominance” strategy on which Trump campaigned. Grassley went so far as to block two of Trump’s Treasury nominees “until I can be certain that such rules and regulations adhere to the law and congressional intent,” as Heatmap’s Matthew Zeitlin covered earlier in August.
Since the guidance came out on Friday, both Grassley and Curtis have put out positive statements backing the plan. “I appreciate the work of Secretary [Scott] Bessent and his staff in balancing various concerns and perspectives to address the President’s executive order on wind and solar projects,” Curtis said, according to E&E News. Calling renewables “an essential part of the ‘all of the above’ energy equation,” Grassley’s statement said the guidance “seems to offer a viable path forward for the wind and solar industries to continue to meet increased energy demand” and “reflects some of the concerns Congress and industry leaders have raised.”
Gas power plants are booming in the U.S. as demand surges, but the growth doesn’t yet mark a fundamental shift away from renewables, clean-energy analyst Michael Thomas wrote in a post on his Substack newsletter, Distilled. “If there were to be an unprecedented pivot to gas, you’d expect Texas to be ground zero for it,” he said. “The state has done everything it can to prop up fossil fuel power in recent years. It’s also one of the most permissive when it comes to environmental regulations and permitting.” Despite major growth in the past year, he wrote, gas made up just 10% of proposed new project capacity in Texas so far this year. The remaining 90% of capacity came from solar, wind, and battery projects. Last year alone, renewable and storage developers proposed 100 gigawatts of clean capacity — seven times more than gas developers proposed.
A new map allowing users to track risks from natural gas super-emitters launched Tuesday from the independent energy science and policy institute PSE Healthy Energy. The Methane Risk Map is a web tool with clickable markers representing individual methane super-emitting events throughout the U.S. Selecting one, as Heatmap’s Emily Pontecorvo wrote, “opens up a heatmap and information panel that shows the concentration of benzene, methane, and other pollutants present in that particular plume, the modeled distance each one traveled during the event, the demographics of the population exposed, and whether there were any sensitive facilities, such as schools or hospitals, in the exposure pathway.”
Though methane, the primary component of natural gas, is an extremely potent greenhouse gas and can pose an explosive risk at high concentrations, other components in unrefined natural gas present more direct public health risks. These include carcinogens like benzene and other health-harming substances, including toluene.
The grid-tech startup Splight has raised nearly $13 million to fund the commercial scaling of its breakthrough software. Unlike dynamic line rating, which uses weather and temperature data to open up more space on existing power lines to funnel as much as 30% more electricity, Splight claims its "dynamic congestion management” software can double the amount of room for electrons to flow without building new grid infrastructure.
The Methane Risk Map combines satellite and geologic data to visualize chemical exposure from natural gas plumes.
Methane-sniffing satellites have brought unprecedented visibility to “super-emitter” events, when the planet-warming gas gushes into the atmosphere at alarming rates — often from leaky fossil fuel infrastructure.
But those plumes contain more than just methane. Scientists are now using satellite data to look beyond the climate risks and assess the danger of super-emitting wells, tanks, and other assets to nearby communities.
PSE Healthy Energy, an independent energy science and policy institute, unveiled a “Methane Risk Map” on Tuesday that illustrates the spread of health-harming pollutants like benzene and toluene that also emanate from methane super-emitter events.
“The Methane Risk Map translates methane as a climate problem into methane as an air quality and human health issue,” Seth Shonkoff, PSE’s executive director, said during a briefing last week.
The vast majority of what we call “natural gas” is methane, but when it comes out of the ground, it also contains a host of other compounds, including carcinogens. The exact mix varies by location, and also changes as it moves through the oil and gas supply chain.
The Methane Risk Map is a web tool with clickable markers representing individual methane super-emitter events throughout the U.S. Selecting one opens up a heatmap and information panel that shows the concentration of benzene, methane, and other pollutants present in that particular plume, the modeled distance each one traveled during the event, the demographics of the population exposed, and whether there were any sensitive facilities, such as schools or hospitals, in the exposure pathway. It also gives the date the emission event occurred and what kind of equipment it came from, if available, such as a well or a tank.
Courtesy of PSE Healthy Energy
Underlying the map are two relatively new scientific developments. The first, as mentioned earlier, is satellite data. PSE pulls data released by the nonprofit Carbon Mapper, which launched its premiere satellite a year ago. Carbon Mapper’s sensing tools, developed in collaboration with NASA, essentially point a telephoto lens at oil or gas facilities to detect methane super-emitter events and measure how much of the gas is streaming out.
The problem, however, is that the satellite can only detect methane.
To solve that problem, PSE researchers created a database of the composition of natural gas at more than 4,000 facilities, spanning 19 oil- and gas-producing basins. When oil and gas operators apply for air permits, they have to submit facility-specific gas composition data from laboratory reports, often derived from direct samples of the gas. Researchers from PSE Healthy Energy went through thousands of regulatory documents to compile a database based on these reports. They found hazardous pollutants in more than 99% of the samples.
To build the Methane Risk Map, PSE combined methane emission rates from Carbon Mapper with this site-specific gas composition data, then used an air dispersion model to estimate the peak concentrations of each pollutant in the surrounding area after the release and show the area at risk. The map includes risk benchmarks set by state regulators for each pollutant, and shows that hazardous air pollutant levels from these super-emitters often exceed them.
While methane itself isn’t toxic, it can pose a safety risk at high enough concentrations from explosions or fires. So in addition to information about traditional air pollutants, users can also view the extent to which the methane released by an event posed a threat to the surrounding area.
One of the shortcomings of the project, and of methane-mapping efforts in general, is that the data isn’t accessible in real time. Carbon Mapper takes roughly a month from when its satellite spots a super-emitter to process and release the emissions data publicly — then PSE will have to run its own models and update its map. The satellites also represent only a moment in time — they don’t tell you when a leak started or how long it lasted. While the time delay could improve with technological and other advances, fixing the latter would require a lot more satellites.
The Methane Risk Map can’t yet function as an emergency response tool in a public health context, but that also wasn’t quite the intent behind the project. The PSE researchers envision policymakers, regulators, lawyers, and communities using the tool to push for stronger regulations, such as safer setback distances, stricter air quality monitoring requirements, and leak detection and repair rules.
The Environmental Protection Agency finalized stronger rules regulating methane and air pollution from the oil and gas sector in 2023, under the Biden administration. But after Trump took over the federal apparatus, the agency said it was “reconsidering” those rules. Since then, the EPA has extended compliance deadlines for many of the rules.
“As regulatory rollbacks in the climate and air quality arenas occur in the coming months, having this type of defensible data on the risk of these events and the risks they pose to human health will become increasingly important,” Kelsey Bilsback, the principal investigator for the project, said during the briefing.
Right now the map only includes emissions from the “upstream” oil and gas sector, but PSE plans to expand the project to include leaks from the midstream and downstream, too, such as pipelines and end-users.