CALGARY - Rising gas prices linked to global oil market volatility are putting pressure on Canadian businesses and consumers, as experts weigh in on how the country’s energy system responds to shifting global conditions.
Economists say the recent rise in gas prices is being driven by global tensions, including conflict in the Persian Gulf.
“The oil market is a globally integrated marketplace,” said Perry Sadorsky, an associate professor of economics at York University’s Schulich School of Business. “The price set in the global market is the price used throughout the world.”
He said higher oil prices quickly translate into higher costs at the pump, since fuel is priced globally.
That dynamic is being felt across Canada, including in Alberta, the country’s largest oil-producing province.
Sukhdeep Dadian, a small trucking business owner based in Alberta, said his company is paying roughly $220 - $300 more to fuel each truck per trip as fuel costs rise, while contract rates remain unchanged.
“The tension in the Middle East has an impact on Canada,” he said. “It’s a very difficult time for the trucking industry.”
Dadian said his company, which provides trucking services for larger firms, has scaled back cross-border trips to the United States and is focusing on shorter routes within Canada.
“If we go on longer hauls, we spend much more on fuel.”
He said some operators have parked their trucks because they can no longer afford fuel, though his company continues to operate due to existing contracts.
Sadorsky said while higher prices can renew interest in expanding production, investment decisions are driven by long-term expectations rather than short-term price spikes.
What does the future hold?
“If you look at what the market is expecting for future oil prices, it’s about $75 a barrel,” he said. “That’s not high enough to justify any major expansion here in Canada.”
He added that even if new projects were approved today, they would take years to come online.
“Given the situation right now, there’s really nothing we can do about it in the short term,” he said.
As for ways for Canada to reduce reliance on global oil markets, Sadorsky says the International Energy Agency points to electric vehicles.
“The IEA has now said that maybe the focus on oil is that it should be dialed back a bit,” Sadorsky said.
“A lot of other countries, particularly countries like in Southeast Asia, they’ve turned directly toward electric vehicles.”
Sadorsky noted that while Canada produces about five million barrels of oil per day, only about one million is consumed domestically, with the rest sold on global markets.
He said policies aimed at keeping more oil within Canada — such as limiting exports — could theoretically lower domestic fuel prices, but would involve significant trade-offs and face political and economic challenges.
“Consumers would be very happy, but producers would be very unhappy,” he said.
Noha Razek, an economics professor at the University of Regina, said Canada’s position as a major oil exporter does not insulate it from global price swings.
“Although we are exporters, we are not energy independent,” she said. “Some provinces still rely on imported oil.”
Razek said Canada needs to diversify its export markets beyond the United States while also strengthening domestic production and infrastructure across provinces.
“We have to work on domestic pipeline issues and domestic production so we can be more self-sufficient,” she said.
She said those steps could help cushion the impact of global shocks.
“That might decrease the volatility, but it will not eliminate it,” she said. “It’s still a global market.”
