Gas prices in Canada saw a slight increase overnight as the North American oil market responded to heightened tensions in the Middle East. The U.S. and Israel jointly attacked Iran on Saturday, leading to concerns about the potential disruption of oil tanker traffic in the vital Strait of Hormuz. Experts suggest that elevated gas prices may persist as long as the conflict interferes with oil shipments through the strait, a crucial global maritime route.
Rory Johnston, an oil markets researcher based in Toronto, highlighted the significance of the duration of any potential closure of the Strait of Hormuz. Short-term disruptions may have minimal impacts, but prolonged closures could significantly affect the market. Despite the uncertainty, Canada’s oil industry is poised to benefit from increased prices due to the country’s perceived stability during geopolitical uncertainties.
On Monday, Brent crude prices surged to $78.04 US before settling at $75.79 US, while West Texas Intermediate crude stood at $70.60 US by midday. Retail gas prices rose to 135.3 cents per litre, marking an increase from a month ago but lower than prices observed a year earlier. Although there have been no immediate supply disruptions, the ongoing U.S.-Iran conflict poses risks of heightened volatility and increased premiums in the oil market.
The potential threats to Iran’s oil production and continued shipping disruptions could further drive up gas prices. Patrick De Haan, head of petroleum analysis at GasBuddy, emphasized the evolving geopolitical landscape and its impact on gasoline prices. The uncertainty surrounding the conflict’s resolution is expected to exert upward pressure on gas prices in the coming days.
The significance of the Strait of Hormuz in global oil trade was underscored by Iran’s warning to shippers to steer clear of the strategic waterway. The strait, through which a significant portion of the world’s crude oil flows, is considered a critical chokepoint. Recent incidents involving oil tankers in the region have prompted precautionary measures, affecting millions of barrels of oil shipments daily.
Jorge Leon, a senior executive at Rystad Energy, highlighted the potential loss of crude oil supply due to disruptions in the strait. While alternative routes exist, the conflict’s escalation could sustain higher oil prices until tensions are alleviated. The situation remains fluid, with ongoing concerns about the impact on global energy markets and consumer prices.