Geopolitical Tensions Threaten Five Key Canadian Economic Sectors Amid Surging Energy Prices

As geopolitical tensions in the Middle East escalate, their economic repercussions are swiftly reaching Canadian markets, manifesting in surging global oil prices that have directly impacted fuel costs across all Canadian cities and provinces. This surge, threatening five vital economic sectors, is sparking widespread concern among citizens and experts alike.

Fuel Price Hikes Burden Consumers

In recent days, gasoline prices in Canadian cities like Calgary have seen a noticeable increase, nearing C$1.52 per liter, with daily hikes sometimes reaching 16 cents. This represents a 10-15% jump compared to last week's levels, and observers anticipate continued upward pressure as long as transit through the Strait of Hormuz remains disrupted.

Despite former U.S. President Donald Trump's statements about ordering the U.S. International Development Finance Corporation to provide 'insurance and guarantees' for vessels crossing the Gulf and the U.S. Navy escorting oil tankers through the Strait of Hormuz 'if necessary,' these declarations have failed to lower prices. Critics have questioned the feasibility of such a move given the immense volume of trade and the significant logistical and regulatory challenges involved.

Canadian citizens, already grappling with years of rising living costs across various sectors, have not taken kindly to these price increases. Several individuals, interviewed by Al Jazeera Net, expressed deep concern over the potential long-term consequences of continued conflict on their daily lives.

Drivers and Transport Workers Face Hardship

Hamed Ataya, a part-time Uber driver, voiced his dismay over rising fuel costs, emphasizing their negative impact on all citizens, especially drivers. He noted that ride-hailing app fares have not been adjusted to offset these increases, meaning a significant portion of his income goes directly to covering fuel, maintenance, and insurance costs. His net profit has become extremely limited, often turning into a loss on shorter trips.

Ataya urged the federal government to address the issue of rising fuel prices, citing their direct impact on citizens' lives, particularly those in the transportation sector who rely on their vehicles as a primary source of income. He also called for platforms like Uber to adjust their fare structures to align with increasing costs, ensuring a fair profit margin that allows drivers to continue operating without losses.

Ahmed Zagout, a photojournalist for The Globe and Mail, shared how rising fuel costs have directly affected his personal finances and work. He spends most of his day driving within and outside the city to cover daily events and stories. Zagout explained, "I used to spend about C$60-80 weekly on fuel for daily trips that sometimes reached 300-500 kilometers, especially when covering events outside the city. But now, with prices over C$1.50 per liter, daily costs are approaching an additional C$15-20, meaning a monthly increase of roughly C$400-C$500 on fuel expenses alone." He added that travel reimbursements at work are not immediately adjusted to reflect these increases, forcing him to pay the difference out of pocket, which strains his personal and family budget.

Alberta's Paradox: Abundant Production, Global Vulnerability

Despite Alberta being Canada's largest oil producer, with daily crude oil output currently exceeding 4.1 million barrels, this significant production does not shield consumers in the province—or the rest of Canada—from the repercussions of global energy market disruptions caused by geopolitical conflicts. This reality leads to higher gasoline prices across Alberta and beyond.

Opportunities and Challenges for Canadian Energy

Regarding the Canadian energy sector's potential to benefit from disruptions in the Strait of Hormuz, economist Dr. Ziad Al-Ghazali explained that if Gulf exports are halted, the global supply shortage could increase demand for heavy oil, similar to Canadian crude. This could boost Canadian exports to Asian markets and expand its share in the U.S. market, Canada's largest oil importer. However, Al-Ghazali highlighted major logistical challenges preventing full exploitation of the current crisis, including limited pipeline capacity from Alberta (total export capacity of about 5 million barrels per day with a slim surplus margin of only 250,000 barrels per day during some periods), limited marine port access for Alberta's oil, and the lengthy time required for infrastructure expansion due to strong regulatory and environmental opposition. Furthermore, the heavy nature of Canadian oil sands crude requires blending with diluents for transport, and the number of refineries capable of processing this heavy crude is limited, slowing market absorption and hindering a rapid response to export opportunities.

Five Canadian Sectors Under Threat

Should the Middle East tensions persist, the most affected sectors in Canada, according to Al-Ghazali's predictions, will be:

• Transportation: Including road, air, and sea transport, directly impacted by rising fuel costs.
• Manufacturing: Affected by increased energy costs for factories and shipping for raw materials and finished products.
• Agriculture: Heavily reliant on fuel for machinery and transport, leading to higher production costs.
• Retail: Impacted by increased shipping and transportation costs for both imported and domestic goods, resulting in higher consumer prices.
• Tourism: Rising aviation fuel and transport costs make travel less attractive and more expensive for tourists.

Government Recommendations and Future Outlook

To mitigate potential economic impacts, Al-Ghazali urged the federal government to take measures such as diversifying energy sources, establishing strategic oil reserves, supporting affected industries, providing tax relief, and investing in energy infrastructure.

The Canadian Chamber of Commerce, in turn, warned that the rise in energy prices would ripple throughout the entire economy, affecting transportation, shipping, aviation, consumer goods, food, as well as other commodities like plastics, fertilizers, clothing, electronics, furniture, and home building materials. In rural areas, residents will be disproportionately affected due to their heavy reliance on diesel, which has reached approximately C$1.90 per liter.

In a related context, Jon Garadick, an aviation management lecturer at McGill University, predicted a significant increase in airfare in the coming weeks and months due to the ongoing conflict and rising jet fuel prices. Garadick stated that international flight prices could rise by C$100 to C$200 one-way if fuel prices remain at current levels. He added that additional fuel surcharges of C$50 to C$100 (approximately US$36 to US$72) might be imposed on flights between Canada and the United States.