How the US-Iran conflict is affecting gas prices in Canada
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Gas prices in Canada rose a few cents overnight as the North American oil market reacts to rising tensions in the Middle East, where the US and Israel launched a joint attack on Iran on Saturday, threatening to destabilize the rest of the region.
If you’re filling up the gas tank this week, high gas prices may persist as conflict continues to block oil tankers from accessing the Strait of Hormuz, one of the world’s busiest and most important naval shipping routes, according to experts.
“The question with Hormuz is not just whether it’s closed, but most importantly, how long it will remain closed,” said Rory Johnston, a Toronto-based oil market researcher and founder of Commodity Context. “If we’re talking hours or days, it’s mostly a miss and the market can overcome it. Weeks or months, that’s obviously a much more serious factor.”
Johnson said the Canadian oilpatch benefits from higher prices because Canada’s relative stability during geopolitical-driven instability is “perceived to be an advantage” for buyers.
As of 12:30 pm ET. On Monday, the price of global oil benchmark Brent crude rose as high as $78.04 US overnight before settling at $75.79 US. West Texas Intermediate crude, the US standard, was higher at $70.60 US by midday.
CBC senior business correspondent Peter Armstrong explains what’s happening around the vital shipping lane in the Strait of Hormuz on Monday as the conflict escalated following US and Israeli attacks on Iran.
How much did gas prices increase?
By Monday morning, retail pump prices had reached 135.3 cents per liter – higher than the 128.8 cents per liter seen a month ago and lower than the 151.4 cents per liter seen a year ago. according to data From gasbuddy.com.
According to Patrick de Haan, head of petroleum analysis at GasBuddy, although there is no immediate disruption to supply, the US-Iran conflict could lead to further volatility and higher premiums, given geopolitical risks.
If there is any threat to the regional production of oil in Iran (Middle Eastern country) One of the world’s top producers of the commodity), or if shipping disruptions continue, it could send gas prices higher.
“In the coming week, seasonal trends are likely to continue and markets will likely face increased upward pressure on gasoline prices given this evolving geopolitical landscape,” de Haan wrote in a letter. blog post Published on Monday.
What does the Strait of Hormuz have to do with it?
Crude oil prices surged after Iran’s Revolutionary Guard warned ships away from the Strait of Hormuz, a narrow waterway on the country’s southern border through which about 20 percent of the world’s crude passes.
“This makes it the most significant oil chokepoint in the world. Any sustained disruption, formal or de facto, would remove a substantial portion of globally traded crude from the market,” George Lyon, senior vice president and head of geopolitical analysis at Rystad Energy, wrote in a note to clients.
Many oil tankers are passing through the strait was killed by projectiles and drones over the weekend, although it is not clear which side is in the conflict. As of Sunday, more than 150 commercial vessels dropped anchor To avoid collateral damage in the Persian Gulf.
Those preventive measures are preventing about 15 million barrels per day of crude oil from reaching their markets, Lyon said.
“Alternative infrastructure in the Middle East can be used to bypass flows across the strait, but the net effect is an effective loss of 8-10 million (barrels per day) of crude oil supply,” Lyons explained, noting that unless the conflict subsides, high prices will persist.
