While the war in Iran has sent gasoline prices soaring around the world, there are growing concerns about how the spike in the cost of other fuels could also affect consumers and the broader economy.

In Canada, the average price of diesel has surged to nearly $2.30 per litre — more than 50 per cent higher than just three months ago.

“It’s unprecedented. We’ve never seen anything like this in the oil market or the refined products market and it’s getting worse,” said Calgary-based petroleum industry analyst Richard Masson.

“The tankers that left four weeks ago just before the war started are just starting to unload at their destinations,” he continued.

“It takes three to four weeks to get where they’re going, but over the last four weeks there have been no tankers leaving out of the Strait of Hormuz.

“So over the next few weeks, places that need those fuels aren’t going to be getting them.”

Masson said the refined products market is experiencing prices like $200 a barrel for diesel fuel.

“And more than that, countries like China have banned exports of refined products. So there are places like California, that depend on refined products coming from China because they’ve had many refineries shut down, who are now scrambling to find replacements for their diesel, for their gasoline.

“The whole global market right now is totally upset, and people are still trying to understand what it all means.”

Small business owners in Alberta are also waiting to see what happens, depending on how long the war drags on.

“Well, the price is going to affect freight and delivery, for sure,” said Ernie Tsu of the Alberta Hospitality Association, who is also owner of the Trolley 5 Brewpub in Calgary.

“We haven’t seen it come down yet from the major suppliers. I’m sure it’s going to,” said Tsu, who admits restaurant menu prices will need to increase if freight and delivery charges increase.

However, Tsu said a lot of restaurants are working with local farmers in an effort to keep transportation costs down and still provide excellent products and that helps “massively.”

Masson said if diesel prices get too high, it could cause the entire supply chain to break down.

“There’s two parts to that. One is the price gets higher for transportation because of the diesel cost and so that gets transmitted through to prices,” said Masson.

“The other is people just can’t get hold of the product physically and so they stop shipping things and so the supply chains start to break down.

“I’m seeing more and more talk about supply chains breaking down like happened during COVID.”

While the members of the International Energy Agency recently agreed to release hundreds of millions of oil from their strategic emergency reserves in an effort to combat a possible shortage of Middle East oil, Masson said it may not help prevent a shortage of diesel, because it’s not the right kind of oil.

“The Middle East produces kind of a medium-sour crude, and that crude goes into refineries and makes a larger proportion of diesel and a smaller proportion of gasoline.

“When that crude goes missing, it affects the diesel supply more and this is the challenge because not all crude oil is the same.”

While much of the oil produced in Canada is suitable for making diesel, Masson said most of the recent increase in U.S. production is lighter oil obtained through fracking, and is not suitable for making diesel.

“We have this real problem where not only is there a smaller supply of crude, but it’s not the right kinds of crude in the right refineries to keep production of things like diesel going at the rate we need — and of course, the economy depends on diesel,” said Masson.

“So we we have to find a way to adjust our consumption and the way we do that is by price. So the higher the price goes, more people will stop using it and only the best uses will happen.

“This is what’s going to happen over the coming weeks as this (crisis) deepens.”

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