North American pipeline firm warns Trump tariffs will hit gas costs | USAEMALL.com

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The chief executive of one of the largest pipeline companies in North America has warned that US tariffs on Canadian and Mexican oil and gas will fuel inflation and threaten energy security, as fears of a global trade war mount.

François Poirier, of TC Energy, told the Financial Times in an interview that US tariffs would reduce efficiency and impose an unnatural barrier to cross-border trade. He added that the three countries should instead remove regulatory hurdles to building infrastructure as a way of boosting liquefied natural gas exports and providing electricity to help fuel the growth of artificial intelligence.  

Tariffs “are typically inflationary in nature because you are not delivering production from the most efficient point to the point of demand, and also . . . prevent collaboration that could help assist with energy security”, he said.

Despite the US being the world’s biggest oil producer, many of the country’s ageing refineries were built to handle heavier grades of crude, such as the type produced in Canada, rather than the lighter grades found in Texas oilfields. 

Restricting imports risks pushing up US petrol prices and hitting the profits of American refiners and Canadian oil producers.

“Canada and Mexico can help the US achieve its goal of US energy dominance, not only with respect to affordability and its domestic markets but allowing the free world to reduce its reliance on Russian energy,” Poirier said.

The imposition of 10 per cent tariffs on Canadian and Mexican energy imports on Tuesday sent shockwaves through North America’s energy industry, particularly in Canada, which pipes 4mn barrels per day of crude oil to US refineries.

Industry groups had intensively lobbied US President Donald Trump’s administration to exclude energy from the tariffs but only managed to secure the lower 10 per cent rate rather than the 25 per cent levied on goods.

Poirier said TC Energy would be insulated from the tariffs in the near term as it was paid monthly fees irrespective of gas prices or how much natural gas travelled along its pipes.

But he warned that over the longer term, the financial health of customers, which was key to driving the business and investment, could be affected.

Canada on Tuesday announced a wave of retaliatory tariffs on more than $100bn of US goods, while the premier of the province of Ontario threatened to cut off electricity exports to the US — which could increase consumer prices in northern US states.

Poirier said US tariffs exposed Canada’s heavy reliance on the US as a market for its energy exports and highlighted the need for Ottawa to diversify to other international markets. He added that this could be done by expanding the nation’s LNG industry and building more oil pipelines to the coast to ship Canadian crude to global markets.

TC Energy, which is headquartered in Calgary, operates 96,000km of natural gas pipelines across North America. It also supplies gas to LNG Canada, the country’s first major export terminal, which could help diversify its energy industry away from the US when it begins operations later this year.

Poirier said the company was hoping to double the capacity of its existing pipeline to LNG Canada.

Last year, TC Energy spun off its oil pipeline division after failing to win regulatory approval to build Keystone XL, a cross-border US-Canada pipeline that former US President Joe Biden cancelled on environmental grounds when he took office.

Last week, Trump called for the pipeline to be built and suggested he would remove all regulatory barriers to enable it to happen.

Poirier said that while TC Energy was no longer in the oil pipeline business he believed there was potential for 1mn to 2mn barrels per day of incremental export capacity from Canada to the US.

Canada “can help serve world markets, both in for crude oil and natural gas, and increase our deliveries to the United States to improve its affordability and reliability”, he said.

“Collaboration among the three countries allows each country to achieve more than it could individually.”