Oil prices rise sharply on Monday following the imposition of tariffs by U.S. President Donald Trump on Canada, Mexico, and China, sparking concerns over potential disruptions in crude supply from the U.S.’s two largest oil suppliers—Canada and Mexico.
As of 0656 GMT, U.S. West Texas Intermediate (WTI) crude futures increase by $1.36, or 1.88%, reaching $73.89 per barrel, while Brent crude futures rise by 73 cents, or 0.96%, to $76.40 per barrel.
On Saturday, Trump announces sweeping tariffs on goods from Mexico, Canada, and China, intensifying trade tensions that could hinder global economic growth and fuel inflation. These tariffs impose a 10% tax on Canadian energy products and a full 25% tax on Mexican energy exports to the U.S.
Impact on U.S. Refineries and Crude Prices
U.S. oil refiners expect an increase in crude prices from these two countries, which provide about one-quarter of the crude processed in U.S. refineries, according to the U.S. Energy Information Administration (EIA). Industry experts warn that the tariffs will likely raise costs for heavier crude grades required for efficient refinery operations, potentially reducing profitability and leading to production cuts.
Concerns Over Future Demand
There are also concerns that the tariffs could weaken oil demand, which may either reduce global oil prices or prompt oil producers to cut production. Saul Kavonic, an energy analyst at MST Marquee, suggests that oil prices might drop in the long run as tariffs dampen demand, creating pressure on OPEC+ to reverse production cuts. However, OPEC+ delegates indicate that the group is unlikely to alter its plan to gradually increase output during their upcoming meeting.
Impact of Price Fluctuations on Nigeria
Nigeria remains vulnerable to global oil price changes due to the country’s limited domestic crude supply and continued reliance on imports. The Federal Government’s Naira-to-Crude initiative, which aims to provide local refiners with crude oil in Naira, faces implementation challenges.
Petroleum product prices fluctuate regularly, with recent reductions in the ex-depot price by Dangote Petroleum Refinery and Petrochemicals. However, marketers note that they still hold petrol purchased at higher prices, meaning the price reduction will not immediately reflect at the pump.
Any rise in global oil prices will impact Nigerians, as ongoing volatility in the global market persists.