New oil trade tariffs: What US fuel retailers need to know about pricing

Following an announcement from the Trump Administration of an imminent imposition of trading tariffs on Mexico, Canada, and China, multiple fuel and convenience associations sent a letter urging them to reconsider.

The EMA, along with NACS, SIGMA, NATSO, NEFI and NPGA, sent a letter to the Trump Administration urging them not to impose tariffs on imported crude oil and refined petroleum products. Arguing that they would increase the price of gasoline, diesel fuel, heating oil, and propane for millions of American consumers. You can read the full letter here.

On February 3, President Trump announced that he was also delaying the imposition of tariffs on Canadian goods for 30 days.

With the potential imposition of trading tariffs, US fuel retailers may be facing increased market volatility. If applied as expected, these tariffs are expected to raise the cost of imported crude oil, leading to higher prices for gasoline, diesel, heating oil, and propane. As a result, fuel retailers must adapt their pricing strategies to navigate this challenging environment.

Understanding the impact of tariffs

The United States relies heavily on crude oil imports from Canada and Mexico, which together account for about a quarter of the oil processed by U.S. refiners. The newly imposed tariffs — 25% on imports from Canada and Mexico, 10% on energy resources from Canada, and 10% on Chinese goods — are anticipated to disrupt supply chains and increase costs for refiners. This disruption has already increased fuel prices for consumers.

Although the tariffs themselves may be short lived, volatility of oil prices in the US will likely continue

Goldman Sachs report that Canadian oil producers are expected to bear the burden of tariffs by discounting Candian crude, which may ease the strain on the US consumer. But if US growth slows, or the US enters a recession, fuel demand will inevitably drop which will have the effect of lowering fuel prices.

Fuel pricing strategies in the face of cost increases

When uncertainty is the only guarantee, a solid fuel pricing strategy is a necessity. To manage the anticipated volatility, fuel retailers can consider the following pricing strategies:

• Maintain margins

Retailers may choose to maintain their current profit margins by adjusting pump prices to reflect increased costs. While this approach helps preserve profitability, it may result in reduced sales volume as price-sensitive customers seek more affordable alternatives. It’s crucial to balance margin preservation with competitive pricing to retain customer loyalty.

• Absorb costs to retain customers

Alternatively, retailers with diversified revenue streams, such as convenience stores or quick-service restaurants, might opt to absorb some of the increased costs. By keeping fuel prices competitive, they can attract more customers to their locations, potentially boosting in-store sales to offset thinner fuel margins.

• Enhance operational efficiency

Improving operational efficiency can help mitigate the impact of rising costs. This includes optimizing supply chain logistics, reducing overhead expenses, and investing in technology to streamline operations. Efficiencies gained can provide more flexibility in pricing strategies.

• Leverage data analytics

Utilizing data analytics can provide insights into customer behavior, competitor pricing, and market trends. This information enables retailers to make informed pricing decisions, tailor promotions, and identify opportunities to maximize profitability even in volatile markets.

The imposition of tariffs on crude oil imports presents challenges for fuel retailers — but volatility is nothing new. By carefully considering fuel pricing strategies and exploring ways to enhance efficiency and customer engagement, retailers can navigate this period of volatility. Regardless of your size, staying informed about market developments and having the ability to adapt your pricing strategy is the key to maintaining competitiveness in this evolving landscape.