TORONTO — Joint military operations by the U.S. and Israel targeting Iranian sites are prompting fresh concerns regarding the potential rise in oil and gasoline prices in Canada. Analysts from GasBuddy.com caution that if tensions persist, drivers might experience a slow but steady increase in fuel costs at the pump.
As trading resumes, oil markets are anticipated to respond, with preliminary forecasts indicating that crude prices may increase by five to ten percent due to concerns over possible supply interruptions in the Middle East. GasBuddy analysts highlight that the primary worry is not just Iran’s oil output but also the potential for unrest in the Strait of Hormuz, a crucial shipping lane responsible for about one-fifth of the world’s oil transportation.
Impact of Military Operations
Even in the absence of a complete shutdown, mere uncertainty can drive prices upward as traders incorporate a geopolitical risk premium. Reports of certain shipping routes being altered in the area have already heightened market concerns, although oil shipments have not entirely ceased.
According to analysts at GasBuddy, the current circumstances are distinct from the significant price surge that followed Russia’s invasion of Ukraine in 2022. Iran’s oil exports are considerably lower than those of Russia, and the global supply-and-demand landscape is not perceived to be as pressured as it was during the post-pandemic recovery phase, when refinery capacity was limited and demand escalated.
Motorists in Canada are anticipated to experience a gradual rise in gasoline prices, although analysts from GasBuddy indicate that any increases are likely to be small, measured in cents per litre, rather than abrupt spikes, at least for the immediate future.
Oil Price Forecasts
Canadian drivers encounter a challenge that is more pronounced than their American counterparts: the exchange rate. Since oil is globally priced in U.S. dollars, a stronger U.S. dollar can lead to higher fuel costs in Canadian dollars, even if crude oil prices fluctuate similarly. If the Canadian dollar depreciates, the retail prices for fuel in Canada may increase at a rate that outpaces those in the United States.
Analysts from GasBuddy indicate that the primary threats for more significant price hikes could involve ongoing disruptions in the Strait of Hormuz, damage to Iranian export facilities, an escalation of regional conflicts, or a notable rise in shipping and insurance expenses.
Currently, the forecast suggests a steady rise rather than sudden spikes, with oil likely to change first and retail gasoline prices adjusting more gradually in the subsequent days.
Experts from GasBuddy warn that the circumstances are still evolving, and predictions may shift rapidly based on how developments occur in the area.
