An energy and resources expert says although there won’t be an oil shortage in Canada, we will see, and are seeing, demand destruction prompted by the closure of the Strait of Hormuz.
Director of Energy, Resources, and Environment for the McDonald Laurier Institute Heather Exner-Pirot says Canada is a massive oil exporter, and we produce much more than we consume, which is great when it comes to avoiding scarcity and shortage. However, Canadians aren’t exempt from paying more at the pump, most likely causing a demand destruction.
“Prices will continue to go up until some kind of normalization happens, and I don’t think we expect that for quite a while…It becomes a kind of voluntary, but also involuntary, restriction for people, just based on what they can afford, which isn’t ideal.”
She anticipates oil could reach prices in the high 100s or even 200 dollars per barrel before the global economy starts to deteriorate.
Exner-Pirot adds that the provincial and federal governments could easily implement affordability measures for residents, especially in Saskatchewan.
“In a place like Saskatchewan, where the government is collecting more revenue as a result of this, it’s fiscally easier for them to do something like reducing provincial fuel taxes, doing a PST rebate, something like that.”
She adds that fuel isn’t just used when filling up your personal vehicle- it is also used to transport goods, so we will likely see the cost of fertilizer, food, and other manufactured products increase, as well.
“You’re already seeing some people trying to seed different things that are less fertilizer-intensive,” she explains. “Pretty much everything will see an increase in price, and the bottom line is, this will all mean higher inflation.”
Demand destruction will arise is poorer countries faster, simply because citizens will not be able to afford the increase. On the bright side, she adds that Canada produces more oil than most people understand and could easily step in to fill the supply gap elsewhere.
“You’d want a country like Canada, which has huge reserves, is a huge exporter, has access to the Atlantic, the Pacific, and the Gulf of Mexico, does not have the same risk of conflict, you definitely want more oil and gas supply coming from Canada. Allies are looking for that. Customers are looking for that, and hopefully we serve that role, so the next crisis is not quite as painful.”
