The U.S. initiated war in the Middle East is taking a direct hit on the price at the pump around the world.
With no clear indication on how long the conflict will last, Canadians are bracing for gas prices to continue to soar.
In Dawson Creek, some stations are charging $1.63/litre. The average price at the pump in Fort St. John now averages $1.59/litre.
The is the first time that gas prices have risen above $1.38/litre in Dawson Creek, since last April. Gas in Fort Nelson was spotted at 1.63/litre.
Ian Lee is a business analyst with Sprott School of Business at Carleton University in Ottawa. He said that, despite the strides taken in alternative energy sources like solar and wind, oil and gas still dominate energy supplies across the globe.
Lee says he expects the price of oil and gas to come down ‘very, very quickly’ once the strait reopens.
Lee added that according to data from International Energy Agency, more than 50 per cent of all energy is produced by oil and gas, and 20 per cent of the world’s supply of oil goes through the Strait of Hormuz, which is currently closed because of the war.
Lee said a lot depends on how long the Strait will be closed for.
“When they open it up, those prices will come down very, very quickly,” he told CTV News Channel on Monday. “But that’s really a question of when the war with Iran will end.”
Lee said that the good news for Canadians is that unlike oil, natural gas prices depend on the region. Since North America has a significant supply of natural gas, he said those prices won’t be impacted, adding that the same can’t be said for places like Europe and Asia, where they’re “seeing natural gas going through the roof, in addition to gasoline prices.”
Macdonald Laurier Institute’s Heather Exner-Pirot on what the closure of the Strait of Hormuz and higher energy prices mean for the wider economy.
Heather Exner-Pirot is the senior fellow and director of natural resources, energy and environment at the Macdonald-Laurier Institute. She described oil as the “wheels of the economy,” which impacts everything from transport to manufacturing and in turn “just about everything gets impacted when you have higher energy prices.”
“What happens when you have high energy prices is you start to see creeping inflation,” she said. “So just about everything gets impacted when you have higher energy prices.”
On Monday, G7 finance ministers met to talk about the possibility of releasing oil reserves. Exner-Pirot said that’s helped subside fear and panic around the situation, with oil on the market taking a bit of a tumble. However, if the Strait of Hormuz continues to be closed, Exner-Pirot stressed that we’ll continue to watch oil prices climb.
“It’s based on physical supply,” she said. “We are simply getting less physical supply into the world. And so you’ll see prices increase until you can get that flow through Strait of Hormuz.”
She added that there will likely be pressure for the U.S. to get prices down going into driving season, and before the midterms.
-With files from M. Popove & Elianna Lev/CTV
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