Analysis by London shipbroker, Gibson, notes that Canada’s
exports to the US of more than four million barrels of heavy crude a day move
mostly through pipelines and would therefore be difficult to redirect.
About three quarters of the Canadian crude goes to the
midcontinent region of the US, Gibson said, where refineries are geared up for
these heavy grades. There is no ready alternative source of crude oil and
refiners would have few options but to pay the tariff and pass the cost on to
consumers, or cut refinery runs.
If Trump were to proceed with the tariffs, Canadian oil
producers would have few options for other markets, Gibson said.
The Trans Mountain Expansion (TMX) pipeline, opened in May,
has doubled Canadian seaborne exports but spare capacity is limited.
About 175,000 barrels a day of TMX crude that currently goes
to the US west coast could be redirected to Asia but these barrels would have
to be replaced with supplies from Latin America or the Middle East, driving up
ton-mile demand.
For Mexico, the situation is less complex, Gibson said. All
of that country’s exports move by sea and European and Asian refiners could
take up more Mexican oil if US demand fell.
This would boost ton-mile demand and could generate more
business for larger tankers on long hauls. However, Gibson warned that vessels
currently ballasting from east of Suez Canal to the US Gulf might
well ship these cargoes, lessening the impact.
The
shipbroker concludes that it is difficult to see the tariffs being enacted in
their present form because they would raise costs for US consumers.
The broker notes that the President-elect has used tariffs
as a negotiating ploy in the past.
Canadian Prime Minister Justin Trudeau dined with Trump at
his Mar a Lago estate on Friday evening. The two men were said to have had a
productive meeting and an ‘excellent conversation’.
Courtesy: Seatrade Maritimes News
