Surging crude lifts producers but stokes fresh stagflation and rate‑hike risks for canada
The world is facing what one expert calls “the largest oil supply shock ever” – and for Canada, that raises the risk of higher inflation, weaker growth, and more policy uncertainty.
According to CBC News, Nicholas Mulder of Cornell University estimates the war in Iran has removed roughly three to four times as many barrels from the market as the 1973 and 1979 oil crises.
He links that to fears that have “all but stopped” tanker traffic through the Strait of Hormuz, the narrow waterway that normally handles about one‑fifth of the world’s crude and liquefied natural gas.
Oil benchmarks have surged and whipsawed.
The Financial Times reports that Brent crude jumped as high as US$119.50, with West Texas Intermediate (WTI) topping US$103.
CBC News says Brent later spiked again to US$119.50 before sliding below US$90, while WTI briefly traded above US$119.48 after sitting near US$70 before the US and Israel launched the war against Iran on Feb. 28.
Economists see a classic stagflation set‑up.
The Financial Times reports that BMO chief economist Douglas Porter warns a “true oil price shock” raises the risk of “higher inflation, weaker growth.”
Capital Economics’ Bradley Saunders told the same outlet that energy accounts for 6 percent of Canada’s consumer price index, so even a temporary jump could have a “big impact” on headline inflation.
Saunders estimates that if oil averages around US$85 for three months before easing, it would add about 0.3 percentage points to headline inflation.
If the conflict escalates into a prolonged regional war and WTI stays above US$100, he says the direct boost to inflation alone would be almost 1 percentage point, with larger indirect effects as shipping, air travel and other costs rise.
The Financial Times notes that Canada will share global pressures on growth and inflation, even as oil‑producing provinces such as Alberta, Saskatchewan and Newfoundland & Labrador are relatively “shielded.”
The rest of the country would be left dealing with higher headline inflation and downward pressure on growth.
At the same time, the Financial Times reports that Saunders expects only a modest lift to real GDP even if high prices become the new normal, because oil and gas producers are operating at about three‑quarters of capacity and still face pipeline constraints to get product to global markets.
He argues that higher earnings should support industry investment and tax revenues, but that benefit will be tempered by weaker consumption as households absorb higher fuel bills.
Those bills are already moving.
According to CBC News, average gasoline prices across Canada climbed to 144.3 cents per litre, up from 127.6 cents a month earlier.
CTV News cites analyst Dan McTeague saying drivers have seen net increases of 15 to 20 cents per litre nationwide, with Vancouver around $1.87 to $1.89 per litre and Montreal close behind.
BNN Bloomberg reports pump prices at 173 cents per litre in British Columbia and 166.6 cents per litre in Newfoundland.
The shock is also hitting Alberta’s fiscal plans.
CBC News reports that the province is running a $4.1bn deficit this year, with Budget 2026 forecasting a $9.4bn deficit.
Those numbers are based on WTI forecasts of US$61.50 for the current year and US$60.50 for the next.
ATB Financial chief economist Mark Parsons told CBC News that current prices could lift near‑term revenues but called Alberta’s dependence on such a “very volatile revenue base” risky.
He said the key question is how much the province can rely on oil to fund growing demands for schools, hospitals and road infrastructure.
The supply shock is also reviving pipeline debates and Canada’s role as a “safe” energy supplier.
CTV News reports that energy minister Tim Hodgson says allies now want a “reliable, a secure, and a sustainable” source of energy and are increasingly focused on Canada.
Economist Colin Mang told CTV News that Canada can add “some additional oil onto the world market,” but he stressed that limited pipeline capacity over the Rockies caps exports to Asian markets and that a second West Coast pipeline, now only at the memorandum‑of‑understanding stage, would still take years to build.
On the US side, Reuters says Strathcona Resources CEO Adam Waterous supports South Bow’s proposal to revive parts of the former Keystone XL through a new route using some existing pipe in Alberta.
South Bow has launched a bidding process for 450,000 barrels per day from Hardisty, Alta., to US hubs such as Cushing and the Gulf Coast, which could lift Canada’s crude exports to the US by more than 12 percent.
Waterous called himself “a very early advocate” of the project and pointed to Strathcona’s goal of growing output from 125,000 barrels per day in 2026 to as much as 300,000 barrels per day by 2035.
The inflation impulse will not stop at energy.
CBC News reports that about one‑third of global urea exports normally transit the Strait of Hormuz and that benchmark nitrogen fertilizer prices have risen about 30–40 percent in a week.
Analysts told CBC News that Canada’s domestic fertilizer production and pre‑existing grocery contracts should limit the near‑term impact on food prices, but they warned that a protracted conflict could push costs higher for farmers this growing season and filter through to consumers by late spring or summer.
Across outlets, experts do not expect quick relief.
BNN Bloomberg cites Heather Exner‑Pirot saying high energy prices act as the “wheels of the economy,” driving “creeping inflation” across sectors.
Gitane De Silva told CTV News Channel that it is “pretty easy to turn the taps off” but harder to restore production, and she expects oil price volatility to persist as long as the conflict does – and for some time after.
