On April 3rd, President Donald Trump announced new wide-reaching U.S. tariffs. The new global tariffs are the highest trade barriers in a century, with a 10% baseline tariff on all imports and other highly targeted tariffs from specific trading partners. The news, which had been teased since the election, shook global markets. Analysts from Goldman Sachs, UBS and others predict that the U.S. GDP growth will fall to near zero for the remainder of the year.

The tariff announcement is causing great uncertainty, but the long-term impacts remain to be seen. President Trump stated, “The markets are going to boom, the stock is going to boom, and the country is going to boom, and the rest of the world wants to see if there is a way they can make a deal.” However, key trading partners, like Canadian Prime Minister Mark Carney, declared, “The global economy is fundamentally different today than it was yesterday.” Similarly, EU chief Ursula von der Leyen said, “The consequences will be dire for millions of people around the globe.” While energy imports are currently exempt from these tariffs for now, the oil and lubricant industry and the businesses that rely on it may not escape unscathed. Here’s how the current tariffs may affect your business.

How tariffs could affect oil prices
Despite the exemption for energy imports, the global crude oil market reacted swiftly to the tariff announcement. West Texas Intermediate (WTI) crude futures fell by over $4 per barrel following the tariff announcement, and OPEC+ announced an unexpected supply increase of 411,000 barrels per day starting in May, which will also affect fuel prices. The long-term threat is that prolonged market volatility will negatively impact the price of oil and could potentially lead to an economic recession, fuel shortages, decreased production investments, and even fuel shortages. Only time will tell how these market shifts will affect the fuel and lubricant industry, and businesses that rely on their products.

Supply chain disruptions are the biggest concerns for the lubricant industry
Right now, the lubricant industry’s biggest concern is supply chain disruptions. As we learned from the COVID-19 pandemic, even slight disruptions can have far-reaching effects. The U.S. lubricant industry relies heavily on a steady supply of crude oil from our trading partners like Canada. Producers refine that crude oil into base oils, the primary component of finished lubricants. But base oils aren’t the only ingredient in finished lubricant products. Crucial additives are also needed and can be sourced from products that may not be exempt from the current tariffs in place. This could lead to production delays, price increases, and industry disruptions.

The tariff announcement also comes at a terrible time for the industry. Spring is typically the maintenance season for most refineries. At this time of year, limited refining production strained U.S. lubricant production while maintenance issues are addressed. That’s why we often see fuel price increases or experience lubricant shortages or order backlogs. According to the EPA, refinery utilization rates are hovering around 87%, which is already stretched thin. Further supply disruptions could lead to more significant refining delays or issues.

How will small businesses and fleets be affected?
As a long-term California fuel and lubricant supplier, we’ve seen a lot of significant industry disruptions. This disruption can potentially have a huge effect on fleet operators, small businesses, and industrial firms in California. Owners and operators should prepare for significant repercussions, including:

  • Fuel prices: Recently, gasoline and diesel prices have gone up slightly. According to GasBuddy, the national average for gasoline rose to $3.11 per gallon in March, while diesel increased slightly to $3.558 per gallon. The initial drop in oil prices may lower prices temporarily, fueled by the tariffs and increased production output from OPEC+, may drop prices temporarily. However, the long-term impact will likely include price increases and supply shortages.
  • Lubricant costs: The recent tariffs will most significantly affect imported lubricants or specialty additives as they disrupt global trade flows. Indirect costs, like additive ingredients, higher transportation fees, or manufacturing expenses, will eventually lead to price increases for manufacturers.
  • Equipment maintenance: As lubricant supplies rise, equipment maintenance will become more expensive. Not only will finished lubricants be more expensive, but replacement parts and machinery costs will rise, too. As the tariffs take effect, no industry will remain untouched, from construction to agriculture.

Prepare for an uncertain market
We know that the uncertainty of the tariff announcements is a major concern. We can only guess what the long-term outlook will be or how long these measures will be in place. Operating in that uncertainty can be nerve-wracking as a small business owner or fleet manager. But there are some steps you can take to mitigate the fallout for your business now.

  • Lock in supply agreements. Now is the time to contact your Greg’s Petroleum representative to sign a long-term fuel and lubricant supply agreement. We offer competitive services, including bulk fuel delivery and wholesale fuel options, that can reduce your fuel expenses.
  • Optimize fuel management: Implementing fuel-saving measures, like our CFN Fuel card program, can reduce your overall fuel costs and make it easier to track and manage your fuel usage. This program can reduce your anxiety about volatile fuel prices as you’ll be able to accurately track and manage all fuel usage in your fleet.
  • Invest in oil analysis: Signing up for our oil analysis program is also a great way to monitor the overall health of your fleet, equipment, and lubricant needs. By participating in this program, you’ll get customized insight into your lubricant and maintenance needs. This can help reduce lubricant waste and maintenance costs and keep your equipment in good condition.

Looking Ahead
The latest round of U.S. tariffs will have broad-reaching effects on a global scale. It remains to be seen how much of an impact it will have or how long it will last. But if your business has operating fleets or uses lubricants extensively, it’s time to start preparing. Take the time to assess your needs, explore cost-saving measures, and stay updated on market developments. As the situation unfolds, Greg’s Petroleum will continue to provide updates and insights to help you make informed decisions. Contact our team today if you have questions about our services, including Chevron Branded Fuels, and how we can help your business prepare for what’s ahead.