Rising Oil Prices Threaten Canadian Economy: Five Key Sectors Vulnerable Amid Middle East Tensions

Geopolitical Tensions Drive Canadian Fuel Prices Upwards

The escalating geopolitical tensions in the Middle East, particularly the potential for conflict involving the U.S., Israel, and Iran, are rapidly manifesting in the Canadian market through a significant rise in fuel prices. This surge, observed at varying levels across all cities and provinces, reflects growing global anxiety over oil supplies.

In Calgary, for instance, gasoline prices have recently climbed to nearly C$1.52 per liter, with daily increases 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, a crucial shipping lane, remains disrupted or threatened.

Despite previous statements from U.S. President Donald Trump that he instructed the U.S. International Development Finance Corporation to provide "insurance and guarantees" for vessels transiting the Gulf, and that the U.S. Navy would escort oil tankers through the Strait of Hormuz "if necessary," these assurances have failed to calm markets or lower prices. Critics have questioned the feasibility of such a move given the immense volume of trade and the substantial logistical and organizational challenges involved.

Citizens Grapple with Soaring Costs: Drivers and Photojournalists Share Impact

Canadian citizens are struggling to cope with these sudden price hikes, especially after years of rising living costs across various sectors. Several individuals, interviewed by Al Jazeera Net, expressed deep concern over the potential long-term impact of continued conflict on their daily lives and personal budgets.

Hamed Ataya, an Uber driver working evening shifts, voiced his frustration over rising fuel prices, stating that they negatively affect all citizens, particularly drivers who rely on their vehicles for income. Ataya explained that ride fares on Uber and similar platforms have not been adjusted to compensate for the increase, meaning a significant portion of his earnings now goes directly to fuel, maintenance, and insurance costs. His net profit has become extremely limited, turning into a loss on some shorter trips.

Ataya urged the federal government to address the issue of rising fuel prices, citing their direct impact on citizens' lives, especially those in the transportation sector. He also called for platforms like Uber to adjust their fare structures to match increasing costs, ensuring a fair profit margin that allows drivers to continue working without incurring losses.

Ahmed Zagout, a photojournalist for The Globe and Mail, also shared how the fuel price surge has affected his personal and professional life. He explained that the rapid increase directly impacts his work and income, as he spends most of his day driving within and outside the city to cover daily events and stories. Zagout noted, "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$400-500 on fuel expenses alone."

Zagout pointed out that these increases come at a time when travel reimbursements or work expenses are not immediately adjusted to reflect such changes. "I find myself paying the difference out of my own pocket, and my net income after deducting fuel, maintenance, and insurance costs is significantly lower, putting pressure on my personal and family budget," he added.

Alberta's Paradox: Oil Production Boom Versus Consumer Price Hikes

Despite Alberta being Canada's largest oil producer, with daily crude oil production currently exceeding 4.1 million barrels (according to Alberta Energy Regulator reports and recent 2025-2026 data, showing a significant rise in early 2026), this substantial output 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 paradox leads to higher gasoline prices across Alberta and beyond, underscoring the interconnected nature of global energy markets.

Opportunities and Hurdles for Canada's Energy Sector

Regarding opportunities for the Canadian energy sector amidst Strait of Hormuz disruptions, economist Dr. Ziad Ghazali stated that if Gulf exports are interrupted, the resulting global supply shortage could increase demand for heavy oil, similar to Canadian crude, thereby boosting Canadian exports to Asian markets and expanding its share in the U.S. market, Canada's largest oil importer.

However, Ghazali highlighted significant logistical challenges preventing Canada from fully capitalizing on the current crisis to boost its oil exports. These include limited pipeline capacity from Alberta, with total export capacity around 5 million barrels per day and a narrow surplus margin of only about 250,000 barrels per day during some periods. Additionally, there are limited marine ports dedicated to Alberta's oil exports, restricting Canada's ability to rapidly increase shipments. He also emphasized the lengthy time required to expand infrastructure due to strong regulatory and environmental opposition, as well as the nature of heavy Canadian oil (oil sands crude) which requires blending with diluents for easier transport. The limited number of refineries capable of processing this heavy crude further slows market absorption and reduces the speed of response to export opportunities.

Five Critical Canadian Sectors Face Economic Headwinds

Should the U.S.-Israeli conflict with Iran and Middle East tensions prolong, the most affected sectors in Canada, according to Ghazali's predictions, will be:

• Transportation and Logistics: Directly impacted by rising fuel prices, increasing shipping costs and affecting supply chains.
• Agriculture: Heavily reliant on diesel and fuel for farm machinery and transport, raising production costs and impacting food prices.
• Manufacturing: Affected by higher energy costs and imported raw materials, leading to increased production expenses.
• Aviation: Experiencing higher jet fuel prices, resulting in increased operating costs and ticket prices.
• Retail and Food: Impacted by higher transportation and shipping costs, which will be passed on to consumers through higher prices for goods.

Calls for Federal Action to Mitigate Economic Strain

To mitigate the potential economic impacts of a prolonged conflict and rising energy and commodity prices in Canada, Ghazali urged the federal government to take the following actions:

• Provide direct support: Offer subsidies or tax breaks to the most affected citizens and businesses.
• Invest in energy infrastructure: Accelerate pipeline and port projects to increase Canada's capacity to export oil and gas.
• Diversify energy sources: Support renewable energy projects to reduce reliance on volatile fossil fuels.
• Promote efficiency: Encourage energy efficiency programs in transportation, industry, and homes.

Broader Inflationary Warnings and Aviation Sector Impact

The Canadian Chamber of Commerce, for its part, warned that the impact of rising energy prices would extend across the entire economy, affecting transportation, shipping, aviation, consumer goods, and food costs, as well as other items like plastics, fertilizers, clothing, electronics, furniture, and home building materials. In rural areas, residents will be particularly affected due to their high reliance on diesel, which has reached approximately C$1.90 per liter.

In this context, John Gradek, a lecturer in aviation management at McGill University, predicted a significant increase in airfare in the coming weeks and months due to continued Middle East tensions and rising jet fuel prices. Gradek told CTV News 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 could be imposed on flights between Canada and the United States.