Gas prices are up 49% in a month: But is this a good sign for Canadians? How global oil volatility is a double-edged sword

But not everyone sees the situation as entirely bad news. Canada sits in an unusual position — it’s one of the world’s major oil producers, which means higher prices cut both ways here in a way they don’t in most countries.

Why Canada is different

The world’s top five oil-producing nations tell part of the story. The U.S. leads with about 22% of global production. Canada, at roughly 5%, sits in fourth place — just ahead of Iraq, and behind Saudi Arabia (2). That means when global oil prices rise, a significant part of Canada’s economy benefits directly.

University of Toronto political science professor emeritus John Kirton put it plainly to Global News: “Canada is a net oil and gas surplus producer and exporter and it will be for the next year even more. So the longer this goes on, the better it will be (3).”

Alberta’s government collects more royalty revenue when oil is expensive. Canadian energy stocks — Suncor, Canadian Natural resources, Cenovus — have climbed sharply since the conflict began (4). For pension funds and investors with Canadian energy exposure, higher oil prices can mean better returns.

But ordinary Canadians still pay at the pump

Here’s the thing that confuses many people: If Canada produces so much oil, why do gas prices go up when there’s a global supply shock?

The answer is that Canadian crude is priced against international benchmarks, such as Brent crude or West Texas Intermediate (WTI). When these benchmarks rise, domestic prices follow — regardless of where the oil was pumped out of the ground (5). As UBC professor Werner Antweiler explained to CBC News, countries in Asia are currently buying North American oil to cover their shortages, which pushes prices up here at home, too. “As soon as there is a bottleneck somewhere, there is a demand for oil everywhere,” he said (6).

The ripple effect to costs happens well beyond the gas station. Everything that’s shipped by the trucking industry — and most goods are — gets more expensive. An Ontario farmer warned BNN Bloomberg that if diesel prices stay this high, grocery bills could rise 25% to 50% in the months ahead — however, there is no data to support this anecdotal claim at the moment (7). Airlines are also feeling it: Both Westjet and Air Canada are sounding the alarm that higher jet fuel costs will likely lead to fare increases (8).

The Bank of Canada’s difficult call

For households already stretched by the cost of living, the timing couldn’t be worse. University of Calgary economist Trevor Tombe told The Hub that Canadians should prepare for prolonged inflation if the conflict continues — and that even a quick resolution might not bring immediate relief, given lingering supply chain disruptions (9).

The Bank of Canada is in a tough spot, too. It can’t lower rates to support a slowing economy if inflation is rising at the same time. Tombe noted that the Bank is predicting where the economy will be in 18 months, rather than focusing only on what’s happening today. That means Canadians shouldn’t expect rate relief as a cushion against rising fuel costs anytime soon.

Actions you can take

Global markets aren’t something any of us can control. But there are small, practical steps you can take to reduce the impact on your own budget right away: