The U.S. Midwest spot refined product market began 2025 with questions over whether the Trump administration will impose tariffs on Canadian oil imports and uncertainties over how summertime sales of E15 in the region will affect gasoline supply.

Roughly 60% of U.S. oil imports in 2023 originated in Canada and accounted for 24% of U.S. refinery output, according to Energy Information Administration data. And Midwest (PADD 2) refineries, many of which are designed to handle heavy oil like those produced in Canada, are by far the largest consumers of Canadian crude, importing more than 2.6 million b/d in 2023, EIA said. The region accounted for nearly 62% of all Canadian crude imports in 2023. While Western Canadian Select crude has typically been priced at a discount to West Texas Intermediate, PADD 2 refiners could see that pricing dynamic upset by Trump’s proposed 25% tariff on Canadian oil.

Petroleum analyst Philip Verleger said potential Trump tariffs would put Midwest refiners at a significant disadvantage to Gulf Coast refiners and could force two to four refiners in the region to close their doors.

U.S. imports of Canadian crude oil in the fourth quarter of 2024 rose to record highs following the completion of the Trans Mountain Pipeline expansion project, which provided increased maritime access for oil exports from western Canada. The U.S. imported 4.3 million b/d of Canadian oil in July 2024, almost 33% more than the 3.245 million b/d imported in July 2023, according to EIA’s analysis of Canadian imports. Proponents of the expansion project had hoped that increased takeaway capacity and access to additional markets would boost the price of Canadian crude. But EIA said the results have been mixed.

Western Canadian Select crude discounts in previous years often increased in the fall, as refiners in the U.S. Midwest cut back on imports due to seasonal maintenance work. With increased export opportunities due to the expansion project “if the price differentials remain near current levels through the end of the year, it may suggest that the added TMX capacity has helped to insulate Canada’s crude oil producers from the operational decisions of refiners in the U.S. Midwest,” EIA said.

Midwest market participants will also have to deal with 2025 year-round sales of E15 in most states in the region. EPA, responding to requests by the governors of Illinois, Iowa, Minnesota, Missouri, Nebraska, Ohio, South Dakota and Wisconsin, in early 2024 agreed to waive Clean Air Act fuel volatility limits that had prevented the sale of the higher-ethanol gasoline blend from June 1 through Sept. 15. The agency’s order, which goes into effect in late April 2025, essentially puts E10 and E15 on equal footing.

Refiners, however, opposed the decision, arguing that it would require them to produce a low-RVP blendstock for just a small part of the U.S. market. In addition, the decision has prompted logistical concerns given that pipelines could be forced to move two different CBOB RVP specifications over the summer.

The American Fuel & Petrochemical Manufacturers in November 2024 asked EPA to delay the decision for a year, citing possible supply disruptions, higher fuel prices over the 2025 summer driving season.

In addition refinery consultant Baker & O’Brien warned in a study that the move would lead to supply disruption given low gasoline stocks in the Midwest. The company estimated the change could reduce PADD 2 gasoline output by 131,000 b/d and raise the region’s imports of motor fuel by 39,000 b/d.

The tariff and E15 worries come after the Midwest gasoline and distillate spot market experienced significant price volatility in 2024. Group 3 sub-octane gasoline hit a 2024 high of $2.5072/gal on March 19 and year-to-day low of $1.7187/gal on Dec. 6. Spot gasoline prices in Chicago reached a 2024 of $2.64/gal high on July 31 and a low of $1.5903/gal on Jan. 8. Gasoline stocks in the region were also volatile, peaking in February 2024 at 61.697 million bbl and falling to 44.299 million bbl in November. In the spot distillate market, Group 3 ULSD peaked at $2.7257/gal on March 18, 2024, ahead of the spring planting season, and fell to a year-to-date low of $1.9426/gal on Dec. 6. The spot price for Chicago ULSD reached a 2024 high of $2.8332/gal on March 18 and set a year-to-date low of $1.93175/gal on Sept. 10. Midwest ULSD Inventories rose to a 2024 peak of 34.401 million bbl in February and a year-to-date low of 26.301 million bbl in November.