As the growing war in the Middle East keeps pushing the price at GTA gas pumps higher, analysts say it could eventually top $2 a litre.
“Let’s say this goes well into the month of April, anything’s possible with the price trajectory,” said Dan McTeague, former MP and founder of Gas Wizard, a price monitoring and forecasting site.
Since the initial Feb. 28 attack on Iran by the U.S. and Israel, the price of West Texas Intermediate oil shot to a high of $119.48 (U.S.) by Monday morning from $67.02, a rise of more than 70 per cent, before falling to $83.66 by 4:30 p.m. Brent Crude rose to $119.40 from $72.48, an increase of 65 per cent, before falling back to $87.59
At gas pumps in the GTA, the average price of filling up your tank has gone from $1.339 a litre to $1.589, according to Gas Wizard data.
Depending upon how long the attacks on Iran last — and Iran keeps blocking the Strait of Hormuz — McTeague said he wouldn’t be shocked if crude rises further, and could even exceed the all-time high of $145 a barrel set in 2008. If that happens, prices at the pumps in Toronto would soar too, he suggested.
“It could hit $2.15 to $2.20 a litre,” said McTeague. “Let’s hope and pray this thing comes to an end quickly.”
And no one, said McTeague, should be breathing a sigh of relief over the late afternoon drop Monday — volatility is the name of the game for the foreseeable future.
“This is only a short-term thing,” McTeague said. “I would not be surprised at all if the price of oil and gasoline started going back up again very soon.”
The record high scenario wasn’t in the cards at the beginning of the war, but as the conflict spreads, that has changed, said Patrick De Haan, head of research at Gasbuddy.com.
“Could we potentially see it near the record? Sure,” De Haan said. “I don’t think it’s likely yet, but I also didn’t think we’d be at triple digit levels, and here we are.”
The growing uncertainty over how far the war will spread — and last — make it harder to forecast prices with any precision, De Haan said.
But it looks like the warring nations are digging in for the longer haul.
“We truly don’t know how high it could go. We don’t know how long it will last,” said De Haan. “The market’s in a bit of a crisis mode.”
While U.S. President Donald Trump has suggested releasing some of his country’s strategic oil reserve in an attempt to tamp down prices, De Haan said that’s unlikely to make a substantial difference.
Nor, he argued, was a decision to allow India to buy more Russian oil, despite sanctions imposed on Russia since its invasion of Ukraine.
“Most of these strategic reserves around the world are just lip service. They’re a way for politicians to say ‘how can I make it look like I’m doing something?’ but it doesn’t really make a difference at all,” De Haan said. “Everything that’s been suggested so far is peanuts. There’s nothing that’s been remotely close to making up the difference.”
Iran has threatened to attack any ship in the Strait of Hormuz, which normally handles shipping for 20 per cent of the world’s oil supply, and 30 per cent of the natural gas supply.
The soaring price of fuel is a welcome boost to the bottom line for Canadian oil and gas companies, said Pedro Antunes, chief economist at Signal 49 Research. The rest of us? Not so much.
“For Canada an oil price shock like this is positive for energy producers but a negative for the rest of the country,” said Antunes.
While people filling up at the pumps have noticed the price hikes right away, oil and gas inflation will eventually spread throughout the economy if the war continues into the medium to long-term, Antunes said.
“Everything that we do requires energy,” said Antunes. “And a lot of what we consume requires plastics, which are made with petroleum products.”
Supply chain guru Fraser Johnson said that even goods shipped via ocean freighter end up in a truck at some point.
“About 70 per cent of freight in Canada is handled by truck, “said Johnson, a professor at Western University’s Ivey Business School.
And there’s a limit to how long producers can simply eat the rise in shipping costs, said Johnson.
“There’s going to be a lag effect,” said Johnson. “They’re going to try to get a measure of how long it’s going to last, because no-one wants to blow a customer relationship over something that’s only going to last a few weeks.”
For perishables like fruit and vegetables, the price increases will likely show up quicker, Fraser added.
Expect to pay more for air travel, said John Gradek, head of the aviation management program at McGill University.
“We’ll see fuel surcharges on airplane tickets within the next few weeks,” he predicted.
Gradek says the surcharge is likely to be as high as $200 to $300 for overseas flights.
A Scotiabank report said that a permanent increase in the price of oil by $10 a barrel would boost Canada’s gross domestic product by a third of a percentage point this year, and half a percentage point in 2027.
But it wouldn’t feel like boom times for everybody, despite potential job growth, Scotiabank said in assessing that scenario.
“Energy sector profits and investments rise, supporting employment and eventually household spending,” Scotiabank reported. “These gains are partly offset by a squeeze on real disposable income; higher gasoline prices act as a regressive tax, reducing discretionary purchasing power.”
The bank added that inflation would also make it harder for the Bank of Canada to cut interest rates — and could even prompt a rate hike.
