Gas pumps showcasing high prices
A month ago, the average Canadian was paying around $1.28 a litre at the pumps for regular gas. As of late March, that national average has climbed to nearly $1.91, with some jurisdictions paying considerably more (1). British Columbia is among the hardest hit, with prices reaching as high as $2.18 a litre in Vancouver.
The cause is clear: The war in Iran has disrupted tanker traffic through the Strait of Hormuz, the narrow waterway that normally carries about 20% of the world’s oil. For Canadian drivers, that means roughly $20 to $25 more every time they fill up their tanks.
But not everyone sees the situation as entirely bad news. Canada sits in an unusual position — it’s one of the world’s major oil producers, which means higher prices cut both ways here in a way they don’t in most countries.
The world’s top five oil-producing nations tell part of the story. The U.S. leads with about 22% of global production. Canada, at roughly 5%, sits in fourth place — just ahead of Iraq, and behind Saudi Arabia (2). That means when global oil prices rise, a significant part of Canada’s economy benefits directly.
University of Toronto political science professor emeritus John Kirton put it plainly to Global News: “Canada is a net oil and gas surplus producer and exporter and it will be for the next year even more. So the longer this goes on, the better it will be (3).”
Alberta’s government collects more royalty revenue when oil is expensive. Canadian energy stocks — Suncor, Canadian Natural resources, Cenovus — have climbed sharply since the conflict began (4). For pension funds and investors with Canadian energy exposure, higher oil prices can mean better returns.
Here’s the thing that confuses many people: If Canada produces so much oil, why do gas prices go up when there’s a global supply shock?
The answer is that Canadian crude is priced against international benchmarks, such as Brent crude or West Texas Intermediate (WTI). When these benchmarks rise, domestic prices follow — regardless of where the oil was pumped out of the ground (5). As UBC professor Werner Antweiler explained to CBC News, countries in Asia are currently buying North American oil to cover their shortages, which pushes prices up here at home, too. “As soon as there is a bottleneck somewhere, there is a demand for oil everywhere,” he said (6).
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