Gas prices in the Greater Toronto Area are surging as tensions escalate following a week of war between Iran and a coalition led by the U.S. and Israel, with analysts warning drivers could see another spike at the pumps this weekend.
Regular gas could climb another six to seven cents a litre by Saturday, analysts say, after prices across the GTA already jumped about 15 cents — more than 10 per cent — since the conflict erupted last weekend.
The surge follows a major strike by U.S. and Israeli forces on Saturday that killed Iran’s Supreme Leader, Ali Khamenei.
Though Canada has its own oil and fuel markets, they are ingrained in the global economy and also suffer price shocks from disruptions that occur halfway around the world, said Brandon Schaufele, director of the Ivey Energy Policy and Management Centre and an associate professor at Western University.
Schaufele says that traders, both in Canada and abroad, responded to the conflict by adjusting financial and energy positions in a way that would help them maintain a secure supply in the coming months.
“The price Canadians observe at the pump is therefore one manifestation of how global energy markets transmit geopolitical developments into domestic fuel prices,” he said.
Drivers are in for a rough ride the longer the conflict continues and the more countries that become involved, warned Roger McKnight, chief petroleum analyst for En-Pro.
“Geography is taking centre stage due to the importance of a crucial global crude oil conduit: the Strait of Hormuz, the passage of which is controlled by Iran,” McKnight says. “Any restriction of tanker movement, whether in fact or rumoured, will increase the price of crude.”
“This is a war that is a politically motivated and the consumer is paying for it.”
McKnight explained fuel prices tend to increase this time of year because refineries are heading into their maintenance season and are producing less gas.
He also added that after the price of gas spikes over the weekend, it should hold for Monday and Tuesday because of how the prices are calculated.
The increased cost of fuel will be reflected in other daily costs in the coming weeks, McKnight said.
“When the price of diesel and transportation fuel goes up,” he said, “the fuel surcharges are applied almost immediately, and you’ll see it at the grocery store. That’s where it hurts.”
Gas and diesel prices across Canada are climbing at a pace not seen in nearly two decades, according to fuel analyst Dan McTeague, who warns the ripple effects will soon reach far beyond the gas pump.
McTeague, president of Canadians for Affordable Energy and a former Liberal MP, said gas prices have jumped about 18 cents per litre in many parts of the country since Tuesday, while diesel has surged by roughly 42 cents per litre.
“This is probably the most dramatic shock we’ve had in the rise in prices going back to at least 2008,” McTeague said. He explained that at the time, the price increase was mostly driven by speculation, whereas the price hikes now are tied to the supply chain disruptions sparked by war.
He pointed to export reductions from Qatar and reported attacks in several oil-producing states, including Bahrain, Saudi Arabia, Kuwait and Iraq.
“By next week, we will start to hear from shipping, delivering, and distributing companies that are going to be requesting a fuel surcharge,” said McTeague. “That’s something a lot of people will not be able to avoid.”
McTeague predicts gasoline could jump another seven cents a litre overnight from Friday to Saturday, while diesel may rise by as much as 15 cents.
He also thinks it’s critical for consumers to pay attention to the value of the Canadian dollar, and how it’s value has remained relatively stagnant.
“In the past when we’ve seen a major increase in oil prices, we’ve always had the Canadian dollar strengthened versus its equivalent, the USD,” he explained. “The fact that it isn’t means that we pay the full price of whatever is happening globally. It’s contributing to what will be an inflationary hit for most Canadians.”
