Tariff Impact Analysis for Valero Energy

Analysis

Valero Energy was primarily affected by tariffs in its Renewable Diesel segment during 2025. Following the introduction of the "Liberation Day" tariffs in April 2025, the U.S. federal government implemented new or revised duties that directly impacted the company's sourcing of foreign renewable feedstocks. These tariffs made the use of certain imported feedstocks economically impractical at times, forcing the company to shift toward domestic alternatives. This shift, in turn, increased demand and market prices for domestic-sourced feedstocks, creating a broad cost headwind for the segment.

The Refining segment, which accounts for the vast majority of Valero's revenue, was largely insulated from direct tariff impacts because energy commodities like crude oil and refined petroleum products were generally exempt from the 2025 U.S. tariff actions. While there were localized issues, such as a temporary suspension of an import permit in Mexico during April 2025 and a retroactive tariff adjustment on a West Coast pipeline, these did not represent the same systemic financial impact seen in the renewable fuels business. Management noted that strong demand and widening sour crude discounts in the refining market largely offset other operational headwinds during the year.

To mitigate the financial impact of the new duties, Valero employed several strategies including the use of established free-trade zones and the optimization of its supply chain to favor more economical feedstock slates. Additionally, the company implemented processes to file duty drawback claims, which allowed for the recovery of a significant portion of the tariffs and duties incurred. Despite these efforts, the combined effect of higher feedstock costs and the transition from the blender's tax credit to the clean fuel production credit led to a substantial decline in Renewable Diesel segment operating income for FY2025.

Looking forward to 2026, Valero expects refining fundamentals to remain supported by growth in demand and limited global capacity additions. While uncertainties regarding trade policy and the final implementation of the clean fuel production credit remain, management anticipates that the renewable diesel market will strengthen as policy guidance is finalized. The company continues to monitor regulatory developments and maintains a disciplined capital allocation framework focused on balance sheet strength and shareholder returns.

Data

($M)

Source: Annual Report FY-2025, Marvin Labs

Financial Impact

• Cost Impact (Historic): $940M

Sources

During 2025, we became subject to newly imposed tariffs on certain foreign-sourced renewable feedstocks, resulting in higher costs for those feedstocks.

These tariffs have at times made the use of certain feedstocks, particularly foreign-sourced feedstocks, economically impractical and resulted in reduced margins.

A significant portion of the new tariffs and existing duties we incurred are eligible for recovery through duty drawback claims.