As gasoline prices keep ticking higher toward $2 a litre and diesel sits near $2.50, there is little relief for Canadian drivers as the global energy crisis grows with no end in sight to the Iran war.
The conflict continues to choke transit through the Strait of Hormuz, cutting off roughly 20 per cent of the world’s oil and natural gas supply from international buyers.
Countries around the world are feeling the strain. Governments have ordered staff to work from home, reduced the work week and closed universities to conserve fuel.
The Philippines is under a national energy state of emergency as local fuel prices have doubled and oil stockpiles have dwindled.
In Canada, the pain at the pumps and the expected rise in inflation is a financial challenge for many as the cost of living continues to climb.
But overall, the country is not nearly as exposed to the impacts of the energy crisis as many other countries.
Canada has some level of protection from the worst impacts of the crisis, considering its abundance of energy production. That’s why it’s faring better than many other countries, especially those grappling with even higher prices and shortages.
“We’re insulated, no question, from what’s happening around the world in that we’re unlikely to run out of oil,” said Warren Mabee, director of the Institute for Energy and Environmental Policy at Queen’s University in Kingston, Ont.
How the global energy crisis is impacting some prices in Canada
Dozens of countries have introduced policies this month to ration electricity, conserve fuel and hoard fertilizer. For instance, vehicles can only be driven on alternate days in Myanmar, and there are limits of 15 litres of fuel per week for drivers in Sri Lanka. In two Australian states, public transit is now free, a measure aimed at encouraging people not to drive.
Asian countries have been hardest hit by the energy crisis, and their citizens are being asked to make a range of sacrifices amid shortages.
In Thailand, the government has urged people to take their jackets off to cut down on the amount of energy used by air conditioning units while sports fans in Pakistan have to watch cricket games at home to conserve fuel.
Some countries, including China and South Korea, are suspending some overseas sales of fertilizer and cutting fuel exports.
In Canada, the impact is largely at the pumps.
Since the Iran war began, oil prices have risen about 50 per cent, and that’s driving up the cost of fuel.
The average price for regular gasoline is $1.89 per litre this week, a 30 per cent increase over the last month. Diesel is averaging $2.32, a 38 per cent jump over the last month.
Furnace oil has increased about 30 per cent since the conflict in the Middle East began.
Rising fuel prices could push inflation higher, experts have warned, and even spark a global economic recession.
Canada is the fourth-largest producer of oil, and the majority of the crude is exported. As a major oil producer with an ample number of refineries, it hasn’t suffered any fuel shortages.
However, oil is a global commodity, and that’s why costs are rising at the pumps.
“The problem, as everybody is discovering, is that having enough oil doesn’t mean that the prices stay low. Our price is the global price or close to it,” said Mabee.
“It’s having a big impact on all Canadians. And so yes, we’ll have enough oil, but it’ll be expensive.”
Canada is the fifth-largest producer of natural gas, but prices have yet to spike within the country because the gas doesn’t move as freely as oil. There is only one natural gas export facility, although some gas is also exported by pipeline to the U.S.
Over the last month, natural gas prices have remained relatively flat in Canada and in the U.S., too, while prices have nearly doubled in Europe.
“We’re more insulated from that,” said Mabee. “The prices are set further in advance. We build up stocks through the summer and use them down in the winter. It’s a slower-moving market, and there aren’t as many connection points.”
Other countries that depend on importing fuel are envious of countries like Canada that have more than enough oil and gas, let alone other sources of energy, such as solar, wind, hydroelectricity and nuclear.
At a global energy summit in Texas last week, an executive with Cairn, India’s largest private oil and gas producer, was on the hunt for companies that could help boost the amount of oil output of India, which only produces about 10 per cent of the crude it consumes.
Anil Agarwal had a “shopping list of $5 billion” to find engineering, drilling and other service companies.
It’s crucial for countries to produce at least half of the oil supply that they need, he said.
“India has to work toward that,” Agarwal said in an interview. “If they don’t have 50 per cent at least, they are energy security vulnerable.”
For now, in Canada, the pumps are not running dry with ample amounts of fuel, even though costs keep rising. And as there is still no end in sight to the war, the energy crisis will only deepen around the world and here in Canada, too.
