1 week Ago By Andrew Schneider
President Donald Trump's 10% tariffs on Canadian and Mexican crude oil imports are having little effect on Houston-area refineries so far. That's in part because crude oil prices have fallen across the globe in anticipation of a recession. But Ed Hirs, an energy fellow at the University of Houston, says a recession is around the corner for the local economy.
"The 10% tariff on the inbound crude oil is going to ripple across the retail side, but it's been offset a bit by the lower and slower economy," Hirs said. Houston-area refineries receive about 1.5 million barrels of crude oil per day from Canada, though not nearly as much from Mexico.
"It does matter," Hirs said of the tariff. "But it would really matter, of course, if the Canadians cut off that supply or if we go to a 25%, 35% inbound tariff on crude oils. We'll see that reflected in gasoline prices right away.
" So far, Hirs said, the tariffs on imported crude and falling crude prices across the globe are balancing out in terms of their effects on refineries and prices at the pump. The West Texas Intermediate price of crude oil has fallen to around $62 per barrel, down from about $80 per barrel in the three months since Trump took office. "The tariffs have backed down GDP and a lot of activity,” Hirs said.
“Investment has stopped for the most part, because the corporations are unsure of what the future's going to be. It certainly looks like we're going to have a recession this year. Things will slow down this summer pretty significantly.
That will, of course, keep pressure down on gasoline prices, even in spite of the tariffs." Hirs said the anticipated recession would affect far more of Houston's economy than just it's energy sector. "Houston has a number of manufacturing companies, a number of companies that rely on functioning supply chains," Hirs said.
"The Port of Houston is going to take a hit not only in terms of inbound traffic but also in terms of outbound traffic. Investment in warehousing, investment in travel is going to diminish due to the uncertainty, not just due to the tariffs but due to the layoffs that are going to be coming here shortly.".
