Saskatchewan drivers are in for a unfortunate surprise after further escalation in the Middle East.
According to Devan Mescall, a professor specializing in accounting at the University of Saskatchewan, 30 per cent of the world’s oil makes its way through the Strait of Hormuz.
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With the supply being affected following the tensions in the Middle East, however, gas prices and other goods could be subject to inflation.
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With unpredictability around how long the conflict will go on, it’s uncertain what the future effects on gas prices will be.
The five-day-old Iran war has “supercharged” oil prices that Canadian motorists are already seeing reflected at the pumps.
Drivers in British Columbia and Prince Edward Island are feeling the pinch the most with prices at the pumps there well above the national average of $1.38.1 per litre Wednesday morning.
CAA data shows that figure is a four cent increase from Tuesday and nearly a nine cent increase a week ago.
Oil prices soared to levels not seen in more than a year on Tuesday as Iran launched a series of attacks against the United States, Israel and neighbouring Gulf countries.
The attacks come after the U.S. and Israel began an aerial bombardment of Iran Saturday, targeting leaders within the Iranian regime and killing 86-year-old Supreme Leader Ayatollah Ali Khamenei.
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U.S. President Donald Trump has said the strikes were intended to ensure Tehran does not obtain a nuclear weapon and aimed at “eliminating imminent threats” from the Iranian regime.
“The early fallout from this dangerous situation will be obvious the longer it goes on and depending on who joins the conflict. 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,” Roger McKnight, chief petroleum analyst with En-Pro International, said in a statement Tuesday.
“Any restriction of tanker movement, whether in fact or rumored, will increase the price of crude, and this will quickly be reflected in consumer costs for all refined products such as gasoline and diesel.”
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A fifth of all oil traded passes through the Strait of Hormuz, the narrow mouth of the Persian Gulf; Iran has disrupted tanker traffic through it, sending global oil and natural gas prices soaring. Iran has also struck energy facilities in oil-rich Qatar and Saudi Arabia.
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McKnight said the price of crude is “being supercharged not by facts but by headlines,” which are spurred on by traders and investors worldwide.
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“The consumer is in for a very rough ride if this war extends in time and/or location. A crude oil increase from $67 to $80 per barrel would mean an increase at the pump of eight cents per litre. A jump to $100 per barrel would work out to a boost of 20 cents per litre,” he said.
“This could all be reversed should the political temperature be reduced. But right now, the pot is on full boil.”
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As of Wednesday morning, the price of West Texas Intermediate was trading at nearly US$74.30 per barrel, while Western Canadian Select was at US$62.21 per barrel.
Data from GasBuddy, a technology company that helps people find cheap gasoline, showed B.C. motorists were paying $1.61.9 per litre for regular unleaded gas Wednesday morning.
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PE.I. drivers found themselves paying $1.54.2 per litre, data from the province’s Regulatory and Appeals Commission shows.
The prices for other Canadian provinces were as follows:
Quebec: $1.52 per litre via Gasbuddy.
Newfoundland: $1.51.8 per litre via Gasbuddy.
Nova Scotia: $1.47.7 per litre via the Nova Scotia Energy Board.
New Brunswick: $1.42 per litre via the New Brunswick Energy and Utilities Board.
Ontario: $1.36.6 per litre via Gasbuddy.
Alberta: $1.33.5 per litre via Gasbuddy.
Saskatchewan: $1.32.5 per litre via Gasbuddy.
Manitoba: $1.32.4 per litre via Gasbuddy.
The Nova Scotia Energy Board used its interrupter mechanism at midnight Wednesday to increase the price of fuel because it was “necessary due to significant shifts in the market price,” it said in a news release.
Even before the Iran attack, gasoline prices were already rising as refiners had begun switching over to more expensive summer fuel blends.
Trump acknowledged the rising oil prices during remarks in the Oval Office Tuesday.
“We have a little high oil prices for a little while, but as soon as this ends, those prices are going to drop, I believe, lower than even before,” he said.
Trump added in a social media post after that, if necessary, the U.S. Navy would escort oil tankers through the Strait of Hormuz. He also ordered the U.S. International Development Finance Corp. to provide political risk insurance for tankers carrying oil and other goods through the Persian Gulf “at a very reasonable price.”
