POSSIBLE US tariffs on Canadian products, including crude oil; enhanced US sanctions on the Russian oil sector by the outgoing Biden administration just a few days before handing over power; the growing squeeze on the Iranian oil output; and the possibility that Russia`s war on Ukraine could come to a forced end soon are some of the variables that areimpacting the global energy markets deeply and, at times, in contradictory directions.

It is still uncertain when the proposed US tariffs on Canadian goods will begin if at all. President Donald Trump is unpredictable; yet, until now, he remains firm on slapping the tariffs on March 4.

Irrespective of when and if they begin, any such move would hurt the intertwined economies of Canada and the US in many ways. Refineries in the US Midwest, dependent on heavy Canadian crude, will have to select from: `Pay more for the crude that it transforms into gasoline anddiesel or slash production,` says Rebecca F. Elliott in a The New York Times piece.

However, President Trump remains clear-headed: `We don`t need their [Canadian] oil and gas,` he said last month. `We have more [oil] than anybody.` Many analysts, however, contest that this statement doesn`t reflect reality.

Many US refineries were designed to run on a blend of different types of crude oil. No matter how much oil the United States pumps and it already is the top producer in the world by far many of its refineries were designed to run on heavy crude that the US does not produce.

These refineries can`t function well without the darker, denser, cheaper and heavily discounted crude that is hard to find domestically. Canada is flush with that oil, and virtually all Canadian oil exports currently go to US facilities like BP`s refinery in Whiting, Ind., which were built around that supply.

With Mr Trump vowing to impose duties on Canadian crude oil and supplying many US refiners at a heavily discounted price, that supply is under threat. This is not going to help the US energy sector, many inthe industry are arguing. It will raise serious questions about the operability of such refineries, but even if they somehow manage to remain operative, it will hurt their bottom lines in a big way.

Companies have little reason to spend billions of dollars reconfiguring their systems for trade policies that may be fleeting, Ms Elliott said.

`It`s not as simple as switching things out,` said Chet Thompson, CEO of the American Fuel & Petrochemical Manufacturers, a trade association.

Furthermore, the proposed tariffs hurt Mr Trump`s support base. The oil and gas industry, one of his biggest supporters, has been urging the president to exempt energy from the tariffs on Canada, underlining that the taxes could cause prices at the pump to rise. Any such development will go against his pledge during the campaign to slash people`s energy bills by more than half.

In a sign that he heard the industry, which gave more than $75 million to his campaign, the president lowered the planned tariff on Canadian energy imports to 10 per cent from 25pc, opined Ms Elliott. Yet his designs are far from clear as yet. And this remains a drag on the energy industry.

One needs to understand that the issue of tariffs on Canadian crude is causing uncertainty in the markets.

This would have consequences for the global demand for gasoline and diesel, which some experts feel could peak in the next decade, as more and more people are switching to electric cars and trucks that run on natural gas and other fuels.

Another factor rattling the energy industry is the aggressive farewell sanctions that the Biden administration slapped on the Russian oil trade just a few days before departure. Those upended global oil trade, as Asia rushed to cover Russian barrels with alternative supplies, and tanker rates soared amid significantly decreased availability of non-sanctioned vessels.

Vessels, specialised tankers, and shuttle tankers transporting Russia`s oil from the Arctic and the Far East Pacific fields and production clusters to Asia have now been sanctioned. As a result, trade in Russian crude loading for Asia in March dropped as tanker rates soared and shippers scrambled for non-sanctioned vessels, Charles Kennedy reported in Oilprice.com.

As buyers become increasingly wary of potentially running afoul of the latest US sanctions, refiners in China and India desperately looked for suppliesfrom the Middle East, West Africa and even Brazil. The price of the Middle Eastern benchmark, Dubai, even flipped to a premium, lower-sulphur Brent Crude, as demand for crude from the Middle East in Asia surged.

Eventually, the chaos in global oil trade will end, Mr Kennedy said, quoting analysts. But this will take time, possibly a few months. Until then, the industry would stay in flux.

The Russian supply disruption came amidst falling Iranian oil imports by its top customer, China, as the US tightened pressure on Iran, and President Donald Trump vowed to bring Tehran`s oil exports to zero.

Goldman Sachs recently estimated that Iranian floating storage has risen by 14m barrels since the start of the year to its highest in 14 months.

Tighter sanctions enforcement could cut Iran`s output by 1m barrels per day (bpd) and could push Brent to the high $80s per barrel by May.

However, the otherwise strong market sentiments were dampened by the possibility of ending the RussiaUkraine war as talks went underway in Riyadh. This was unthinkable a few months earlier. If that happens, the US-led Western sanctions on the Russian oil trade could be lifted, bringing more crude into the markets.

Geopolitical developments and political unpredictability are causing uncertainty in the oil markets. Until the web is cleared, the flux in crude oil markets will persist, and Pakistan needs to be aware of it. •