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US refiners could be adversely affected by new US tax on Mexico

June 06/2019

MOSCOW (MRC) -- US President Donald Trumps threats to tax Mexican imports could disrupt a long-standing cross-border energy trade, hitting US consumers and refiners that use Mexican oil by boosting prices, and raising concerns about potential retaliation by the worlds biggest buyer of US energy products, reported Reutes.

Mexico sends 600,000 to 700,000 barrels of oil to the United States every day, mostly to refiners that process that crude into gasoline, diesel and other products.

Mexico buys more than 1 million barrels per day (bpd) of US crude and fuel, more than any other country, and analysts are concerned that retaliatory tariffs from Mexico could disrupt that trade.

"I cant see how the outcomes are going to be constructive," said Carlos Pascual, a former US ambassador to Mexico who now helps run consultancy IHS Markits global energy business.

Trump on Thursday vowed to impose a tariff on all goods coming from Mexico, starting at 5% and increasing monthly until the surge of undocumented immigrants from across the border subsides.

Mexico and the United States, along with Canada, are trying to finish a broad free-trade agreement to replace the 25-year-old NAFTA deal. If implemented, the tariffs would begin June 10. So far Mexico has not said it would retaliate.

The imposition of tariffs may spur "retaliatory actions that impair the development of new markets," said a spokesman for Chevron Corp, adding the company supports free and fair trade. Chevron has opened 100 retail gasoline stores in Mexico since 2017.

Trade group American Fuel and Petrochemical Manufacturers warned tariffs could raise domestic fuel prices and jeopardize the proposed trade deal. The American Petroleum Institute said the tax could hurt the US economy.

Tariffs could add USD2 million to the cost of daily Mexican crude purchases by US refiners, analysts at PVM Oil Associates said.

A sharp decline in supplies from Mexico could raise the cost of fuels overall if US refiners are forced to buy heavier crude grades from further away, adding to shipping costs.

However, crude traders noted that most Gulf Coast refiners that buy Mexican crude are located in so-called Foreign Trade Zones, which allow them to avoid tariffs so long as the refined products are exported - though these refiners also supply US markets.

Refiners have been using Mexican heavy crude grades in part to offset the loss of barrels from Venezuela, which has been under US sanctions for months.

The primary importers of Mexican crude include refineries owned by Valero Energy Corp, Phillips 66, Exxon Mobil Corp and Chevron Corp. Mexico accounted for about 9% of total US oil imports last year, TPH said.


mrcplast.com
Author:Margaret Volkova
Tags:crude and gaz condensate, Chevron, Exxon Mobil, Phillips 66, Valero, Mexico, USA.
Category:General News
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