U.S. oil companies are frantically lobbying congressional allies and the White House against President Trump’s plan to slap escalating tariffs on Mexican exports, saying it would hike the price of gasoline and strain refiners reliant on crude from the country.
The oil industry’s pushback adds to the pressure on Republicans mulling legislation to counter Trump’s threatened 5% tariff, which would raise the cost of roughly 712,000 barrels of crude and petroleum products imported daily from Mexico, along with imported mineral fuels valued at $16 billion last year.
Oil lobbyists are warning top Trump administration officials and congressional allies of widespread economic harm, both for refineries reliant on Mexican crude and U.S. motorists hit with higher gasoline prices. In appeals to the White House, lobbyists are stressing that tariffs on Mexican goods would jeopardize the president’s other priorities: ensuring American “energy dominance” and a thriving manufacturing sector.
“Folks are talking to everybody who will listen,” said Josh Zive, a senior principal at Bracewell LLP, which represents several refining companies. “You are talking about millions and millions of dollars that will have to either be absorbed by U.S. employers or passed on to consumers, and there is no formula by which that is good for the economy or good for these energy users.”
Refining lobbyists are offering the administration one immediate solution: exempting crude from the tariffs if Trump goes forward with the plan. Otherwise, they warn, the added costs will be borne by U.S. oil companies, with much of it passed on to U.S. motorists and hitting during the summer driving season.
Oil companies are finding a receptive audience on Capitol Hill, where Republican senators have warned the administration that there may be enough votes in their conference to override a Trump veto of tariff removal legislation. It would require 20 Republicans to do so.
The two Republican senators from Texas — the top U.S. oil-producing state and home to about a third of the country’s refining capacity — are among the most vocal critics. Sen. Ted Cruz urged his Republican colleagues to tell Trump they oppose the move during a closed-door lunch Wednesday.
“The president is absolutely right that we need to solve this problem, but there is no reason that millions of farmers and ranchers and factory workers in Texas should pay the price and should face $30 billion in new taxes,” Cruz told reporters afterward.
And Sen. John Cornyn warned about widespread economic risks. “We need to put our heads together and try to come up with a solution,” he said. “Any actions that we take to secure our southern border must also keep in mind the important role that Mexico plays in the economy of the United States.”
Trump vowed to impose tariffs as high as 25% on all goods coming from Mexico — starting with 5% on Monday — unless the country takes actions to stem the flow of undocumented immigrants crossing into the U.S. Negotiations were set to resume Thursday afternoon at the White House, after Trump complained “not nearly enough” progress had been made during talks Wednesday to avert the tariffs.
The U.S. is considering delaying the tariffs as talks continue, according to people familiar with the matter.
The plan has caused alarm for two of Trump’s valued political constituencies — farmers and the oil industry — which along with automakers are encouraging receptive congressional Republicans to pass legislation blocking the tariff plan and lobbying administration officials to change course.
Overall, Mexico accounts for about 10% of U.S. oil imports and is the No. 3 supplier of raw crude to the U.S., after Canada and Saudi Arabia, providing some 712,000 barrels per day in March, according to the U.S. government’s Energy Information Administration.
The risk is particularly acute for U.S. Gulf Coast oil refineries that churn Mexico’s sludgy Maya crude into gasoline — and which were already struggling to find new sources of heavy oil amid production cuts in Canada and sanctions on Venezuela and Iran. That includes refineries operated by Royal Dutch Shell Plc, Valero Energy Corp., and Chevron Corp., the top three U.S. importers of Mexican crude in February.
Crude oil from Mexico is “helping to fuel manufacturing jobs and productivity here in the U.S., where we are the most competitive in the world,” said Derrick Morgan, senior vice president of the American Fuel and Petrochemical Manufacturers Assn. “We are talking about a raw material, coming to the United States, and we here in the U.S. add a lot of value to that raw material and can export it around the world.”
They caution that a crude import exclusion might not be enough. Retaliatory tariffs imposed by Mexico could affect oil and petroleum products the U.S. sells to the country — $34 billion worth in 2018, according to the U.S. trade representative.
“For every barrel of crude that we import from Mexico, we export two barrels of products,” Morgan said.