Even in the best case scenario, Canadians are set to pay $12 billion over the next 12 months due higher oil prices, a report by the Centre for future Work shows. Economist Jim Stanford said in the report that Canadians should fight the dominant narrative that these increased price pressures are a natural and inevitable side effect of the war in Iran.
“This is a lie intended to prevent Canadians from asking hard questions about why their living standards are being undermined by a far-off war that does not involve them,” he wrote in the report. “Prices for petroleum products have not shot up because of natural market forces. Events in the Persian Gulf are dramatically affecting our economy because of a policy choice, not laws of economic nature.”
The report projected that a lack of proper policy interventions will force Canadians to pay billions. The U.S. and Israel’s attacks on Iran led to the closing of the Strait of Hormuz which remains closed as of May 21.
Even if the Strait reopened immediately, Canadian consumers would pay an additional $12 billion over 12 months in direct higher fuel costs. If the Strait remains closed for three more months – approximately the amount of time it has been closed so far – Canadians would pay $30.6 billion in higher costs. Six more months, and Canadians pay $41.8 billion.
Canada is a net exporter of oil. As such, Stanford argues that Canadian oil prices don’t need to follow global trends too closely. However, these price shocks are occurring to line the pockets of big oil companies.
“They never waste a crisis,” Stanford said in an April webinar on oil prices. “Whatever the crisis of the moment is, it’s another reason to build a pipeline.”
Harnessing the profitability of the current crisis will increase profit margins for oil companies with devastating consequences for Canadian workers. In 2022, oil prices spiked in response to the Russian invasion of Ukraine. These price spikes were also criticized for being driven by profiteering rather than genuine market pressures.
In the subsequent years after the 2022 spike, the Bank of Canada raised interest rates to try and reign in inflation caused by higher oil prices. These measures pushed unemployment higher.
Labour and environmental groups are calling for a tax on the profits gleaned from rising oil prices to combat profiteering and serve the average Canadian. The Council of Canadians, 350.org Canada and the Alberta Federation of Labour have all called for a tax on oil companies’ war profits with the income being used to support Canadian households affected by the cost of living crisis.
Revenue from a tax on oil profits could also fund other forms of energy in Canada, Stanford noted in his report.
