The conflict between the U.S. and Israel against Iran is leading to a significant increase in diesel prices across Canada, surging by almost 30% since the commencement of the war. This week, the average retail cost of diesel has peaked at $2.19 per liter, marking the highest price point since 2022 when Russia invaded Ukraine. In contrast, regular gasoline is currently priced at an average of $1.75 per liter at gas stations, according to data from Kalibrate Canada, a fuel analytics firm. The sharp rise in diesel prices is anticipated to result in elevated shipping expenses as diesel is crucial for the transportation industry, powering trucks, trains, and barges.
Andrew Lipow, the president of Lipow Oil Associates, emphasized the significance of diesel prices, stating that it is the primary fuel for the delivery of consumer goods and services. Various sectors in Canada, including farmers, trucking companies, and transit groups, are already feeling the financial strain from the spike in diesel prices, potentially leading to cost burdens being passed on to consumers. Trevor Wideman, the sales manager at West Coast Transportation in London, Ontario, noted the immediate impact of the escalating diesel prices on their operations, highlighting that conflicts in the Middle East typically trigger rapid increases in oil and fuel prices.
Transportation companies are expected to transfer these increased costs to consumers, affecting a wide range of products and services. On Tuesday, the highest average diesel price was recorded in Chicoutimi, Quebec, at $2.49 per liter, while Grande Prairie, Alberta, had the lowest price at $1.85 per liter. The ongoing conflict in the Middle East, particularly the closure of the vital shipping lane, the Strait of Hormuz, has disrupted global oil supplies, leading to a nearly 50% surge in North American oil prices.
Dennis Darby, the chief executive of the Canadian Manufacturers and Exporters, highlighted the challenges that rising fuel prices pose to industries already grappling with tariff issues. The increased diesel costs contribute to higher transportation expenses, impacting various facilities that rely on diesel in their production processes. Lipow mentioned that trucking and rail companies are implementing fuel surcharges to offset rising costs, expressing concerns about the forthcoming agricultural season and its potential impact on food prices due to increased expenses for fuel and fertilizer.
Furthermore, Lipow cautioned that the war’s effects on diesel prices are unlikely to subside soon, with projections suggesting a prolonged conflict. The ongoing conflict has disrupted not only crude oil production but also the export of diesel and jet fuel from the Middle East, leading to supply shortages. Additionally, Asian refiners reliant on Middle Eastern crude oil have had to reduce refinery operations, exacerbating the supply constraints in the market.
