Tariffs, OPEC+, Carbon Tax Removal Drop Diesel Prices | Advisor Pulse

On April 2, U.S. President Donald Trump announced a minimum baseline tariff rate of 10%, as well as reciprocal tariffs on U.S. trading partners. Nearly 60 U.S. trading partners are subject to the reciprocal tariffs, ranging from 11–50%, while all others are subject to the minimum baseline tariff rate. The reciprocal tariffs are meant to retaliate against other nations’ tariffs, trade barriers, or even non-trade barriers (e.g., VAT systems). The 10% minimum baseline tariff on all imports begins April 5, while country-specific reciprocal tariffs begin April 9. Mexican and Canadian goods covered by the USMCA are exempt from reciprocal tariffs. However, the tariffs implemented in March remain in place. Non-USMCA-compliant goods are subject to the 25% tariff rate, while non-USMCA-compliant oil, gas, and potash face a 10% tariff rate. Although crude oil, natural gas, and refined energy commodities are exempt from the 10% minimum baseline tariff rate, market sentiment for the significant economic impacts of the reciprocal tariffs and minimum baseline tariff rate have had reverberating impacts throughout energy markets.

Tariffs, OPEC+, and tumbling prices: A volatile week in the energy market

The energy market is reeling after a one-two punch of geopolitical and supply-side developments that sent prices sharply downward. Just a day after President Trump unveiled a sweeping set of reciprocal tariffs, concerns about a global trade war began to weigh heavily on oil and diesel prices.

While crude oil imports were notably excluded from the new tariffs, fears of an economic slowdown and diminished demand for refined products still sent shockwaves through the market.

Crude oil and diesel prices plunge

The impact was immediate. On Thursday, U.S. benchmark WTI crude dropped 6.6%, closing at $66.95 per barrel. Diesel followed suit with a 12¢ per gallon drop in national wholesale prices, landing at 305.40¢ per gallon.

The slide didn’t stop there. Friday, April 4, crude oil prices shed another $5.00 per barrel, bringing WTI closer to $60—a level not seen since April 2021. Diesel prices also fell again, dipping another 11¢ per gallon and pushing prices for the first full week of April beneath the 300.00¢ threshold. 

This rapid decline in wholesale pricing is expected to widen the gap between wholesale and retail fuel prices. Retail prices, tracked by the Department of Energy (DOE), adjust more slowly to market dynamics—widening the margin between retail and wholesale diesel prices in the near term and highlighting the importance of a market-based fuel reimbursement program that fluctuates with the market.

OPEC+ adds fuel to the fire

President Trump’s tariff announcement was not the only catalyst for this week’s downturn. OPEC+ added more downward pressure into the market. In a surprise decision, eight member countries committed to increasing oil output by a total of 411,000 barrels per day (bpd) starting in May—far outpacing the previously agreed-upon hike of 135,000 bpd.

This move, intended to unwind part of the 2.2 million bpd cuts instituted during 2022, continued downward price pressure for crude oil and products refined from it. OPEC+ leaders cited “healthy market fundamentals” and a strong economic outlook to justify the increase. However, their decision triggered further sell-offs across global energy markets.

Brent crude, the international benchmark, fell 6.4% to $70 per barrel, compounding losses driven by the new U.S. trade measures. The output hike also reflects OPEC+’s ongoing efforts to enforce production discipline, especially among nations like Kazakhstan that have exceeded quotas.

Despite the production bump, OPEC+ is still maintaining total crude production cuts equal to 5.85 million bpd—or more than 5.5% of current global oil supply. The group is scheduled to reconvene on May 5 to evaluate market conditions and set output levels for June. While optimistic, they’ve emphasized that all increases remain subject to change if market dynamics shift.

Looking ahead: A volatile road for energy prices

The convergence of U.S. trade policy and OPEC+ production decisions will bring more volatility to the market. As markets digest the implications of both, transportation supply chain stakeholders should brace for uncertainty in the weeks ahead.

Whether the market finds a floor near $60 per barrel or continues its descent will depend on how geopolitical tensions evolve and whether global demand signals remain intact.

Canada Carbon Tax

Finally, Canada saw an additional marked diesel price decrease, effective April 1. Prime Minister Mark Carney eliminated the country’s carbon tax on fuel, known as the fuel charge rate. The diesel fuel charge rate for most provinces was CAD$0.2139/litre, with two key exceptions – British Columbia and Quebec. British Columbia had its own, slightly lower, provincial fuel charge rate, to account for the higher biofuel content. Effective April 1, British Columbia also removed its fuel charge rate, which was at CAD$0.2074/litre. Quebec’s cap-and-trade system, which adds an average cost of approximately CAD $0.14/litre to diesel, will remain in effect. 

For ongoing tariff developments, check out Breakthrough's Tariff Hub.