Peter Schiff says rising oil prices won’t cause higher inflation — but it will trigger something else. What Canadians need to know

But Peter Schiff, a renowned economic forecaster and outspoken gold advocate, resists that conventional thinking.

In a recent post on X, Schiff argued that higher oil prices likely won’t directly drive inflation (1).

“Rising oil prices won’t cause higher inflation. More expensive oil means Americans will have less money to spend on other things. Reduced spending will cause a recession, which will result in larger budget deficits, rate cuts and QE. That’s what will cause higher inflation,” he wrote.

Although Schiff’s comment references the U.S., Canada isn’t exempt from this scenario. The Bank of Canada held its key interest rate at 2.25% as recently as March 18, 2026, and gas prices have already felt the pressure — hitting a national average of $1.91 a litre, up 49% since late February. That’s before the full trickle-down has worked its way through the supply chain.

The “QE,” Schiff is referring to is quantitative easing — a tool central banks use to stimulate spending when the economy slows. The Bank of Canada used it during the pandemic and could face pressure to do so again.

Schiff flips the story

Schiff’s argument focuses on sequencing. In his view, rising oil prices don’t directly cause inflation. Rather, they set off a chain reaction.

Higher oil prices mean consumers spend more on energy. That leaves less money for other spending, which slows the broader economy. As growth weakens, the risk of a recession rises.

From there, Schiff predicts the usual government response will follow — bigger deficits, lower interest rates and eventually quantitative easing. In his view, that combination is what really drives inflation. Higher oil prices are only the trigger.

A simple example of how Schiff’s idea plays out

When the war in Iran began in late February, we didn’t have to wait long to feel the effects. Gas prices climbed 50 cents from $1.28 to $1.78 on average in a matter of weeks. That’s a 27% jump at every station across the country (2) — it has since risen to an average of $1.91 a litre.

For a driver filling up a mid-size vehicle with a 55-litre tank, that’s roughly $27.50 more at each fill-up. For a household with two drivers filling up twice a week, that adds up to hundreds more over a span of several months. Multiply that across Canadian households and demand starts to weaken across the economy. Trevor Tombe, a professor of economics at the University of Calgary and director of fiscal and economic policy at the School of Public Policy, estimates that a sustained 50% increase in crude oil prices would add roughly $500 to the average household’s costs each year in direct fuel spending alone (3).

And those costs don’t stay at the pump for everyday drivers: trucking costs rise which pushes up grocery prices. Airlines face higher jet-fuel costs, which raise ticket prices. Furthermore, manufacturers will have to pay more to ship goods.

Tombe also estimates that higher fuel costs could push grocery prices up another 1% — or, around $75 each year for the average Canadian household. If the price of oil stays elevated, food inflation could rise from 5.2% to somewhere between 6% and 6.6% by mid-2026.

Canadians will have to adjust how they spend. It may mean fewer dinners out, fewer online purchases or cutting back on services. Multiply that behaviour across millions of Canadian households, and demand starts to weaken in other parts of the economy. That’s ultimately what Schiff is talking about.

How this looks in real life

Schiff’s thinking is more than just theory.

In the words of Steve Kopits, president of Princeton Policy Advisors: oil shocks coincide with recessions (4). This causal phenomenon can be witnessed throughout history. The energy crises of the 1970s pushed both Canada and the U.S. into a recession, with oil prices nearly quadrupling within several months (5). In 2008, a sudden increase in demand saw oil prices soar and set the stage for the 2008 financial crisis (6).

And it’s not hard to see why. When energy costs rise, everything gets more expensive: groceries, shipping, manufacturing and household heating. That leaves consumers with less to spend on everything else, and businesses with thinner margins. It’s less like a market correction and more like a slow tax that no one voted for.

Canada was already showing cracks before this most recent shock. The GDP contracted in the fourth quarter of 2025, and the country lost 84,000 jobs in February 2026, pushing unemployment to 6.7%. That doesn’t set a strong foundation heading into an oil-driven inflation spike.

It also puts the Bank of Canada in an uncomfortable position. A weakening economy normally calls for lower interest rates to encourage spending — but cutting rates when inflation is already climbing from rising energy costs risks making the situation worse. There’s no clear answer, and that uncertainty is what has investors on edge.

Why some investors turn to gold in uncertain markets

When investors start worrying about both inflation and a recession at the same time, traditional assets don’t always behave as expected. That’s one reason they’ll circle back around to gold.

Gold has a long track record of holding its value when inflation rises or currencies weaken. That’s why it’s often the first place investors turn when economic conditions become unstable.

Schiff, a vocal gold advocate and owner of gold-selling companies, recently posted on X: “Falling real rates are bullish for gold” (7).

For Canadian investors, gold is an accessible inflation hedge — and it can be held in a tax-advantaged account. The Canada Revenue Agency (CRA) allows investment-grade gold bullion of at least 99.5% purity to be held inside a Registered Retirement Savings Plan (RRSP) or a Tax-Free Savings Account (TFSA), as long as it’s purchased from an accredited source such as the Royal Canadian Mint (8). Either of these investment options mean Canadians can gain exposure to this precious metal while benefiting from either tax-deferred or tax-free growth.

For those who prefer not to hold physical metal, gold exchange-traded funds (ETFs) listed on the Toronto Stock Exchange (TSX) — such as the iShares Gold Bullion ETF (CGL) — are fully eligible for registered accounts and provide a simpler way to track the price of gold.

Many financial advisers suggest keeping precious metals to roughly 5% to 10% of a well-balanced portfolio as a diversification strategy and inflation hedge (9).

Gold is one way investors try to protect against inflation. But there are other options, too.

Real estate — and why it holds fast against inflation

Unlike assets such as gold, income-producing real estate can generate cash flow while also benefiting from rent increases over time.

For Canadian investors, real estate investment trusts (REITs) — companies that own and manage portfolios of properties and trade on the TSX — offer a way to gain real estate exposure without the capital requirements, maintenance costs or tenant headaches of owning a rental property.

By law, Canadian REITs are required to distribute at least 90% of their net operating income to investors annually, which is why their dividend yields tend to be materially higher than those of most other equities (10). Canadian REITs delivered an 11.8% total return in 2025, outperforming the global REIT benchmark of 8.3% (11).

Like gold, REITs can also be held inside a TFSA or RRSP, adding a tax-efficient layer to income-producing real estate. Most Canadian financial planners suggest keeping REITs to roughly 5% to 10% of a well-balanced portfolio (12).

Where there’s pushback

Not everyone agrees with Schiff’s theory.

In fact, many X users pushed back on his argument, claiming that rising oil prices can be inflationary right away — not only through policy responses later on.

Keith Woods, author of Nationalism, wrote: “Great illustration of how simplistic the libertarian understanding of economics is. For Peter, inflation simply has to always be central bank-driven and downstream of ‘money printing.’” (13)

He added that “an oil shock is the classic case of cost-push inflation because it raises production costs.”

The economic organization International Monetary Fund (IMF), also notes that supply shocks — such as those in oil — can drive “cost-push” inflation by raising production costs across the economy (14). In practice, that means higher fuel costs don’t just hit consumers at the pump. They affect everything a consumer pays for.

Randall Bartlett, deputy chief economist at Desjardins, made a similar point in the Canadian context, warning that the war in Iran could affect inflation through multiple channels: “You have to layer on the Iran conflict, in the oil price shock that we’ve seen, the rise in gasoline prices, transportation costs, supply chain disruptions,” he said. “And so that’s really thrown a lot of uncertainty into the outlook for the economy, for inflation and for monetary policy.” (15)

That’s where Schiff’s argument diverges from the mainstream view. While he focuses on how higher oil prices reduce spending and slow the economy, there’s also a real and immediate impact on prices — one that Canadian families are already feeling.

What rising oil and inflation mean for your wallet

Higher oil prices could eventually tip the economy into a slowdown, triggering rate cuts and renewed stimulus. That could bring volatility and a policy-driven rebound in asset prices.

But if inflation remains stubborn, the Bank of Canada keeping interest rates higher for longer will continue to put pressure on household budgets — particularly the wave of Canadian homeowners renewing mortgages, who are already facing higher fixed rates than a few months ago (16).