Fuel Costs On The Rise As Latest Geopolitical Turmoil Drives Up Crude Oil Prices

Fuel costs are on the rise in Canada as geopolitical turmoil drives the price of crude oil to its highest level in more than a month.

The Canadian national average sat above $1.80 a litre on Thursday — a two-cent increase from a day earlier and an eight-cent bump from a week ago, according to Gasbuddy.com, which crowdsources pump price data from across Canada and the U.S.

That could rise by another five to 10 cents over the next week or two as the full impact of the crude price jump works its way through the supply chain, said Patrick De Haan, head of petroleum analysis at Gasbuddy.

West Texas Intermediate crude for September delivery is hovering above US$92 a barrel, an almost six per cent increase from a day earlier. The price of Brent, the benchmark for seaborne light crude, has edged back into the triple digits, its highest level since May.

The impact is being felt even more sharply for another fuel derived from crude — diesel. That fuel now costs around $2.10 a litre and could surge past its April record of $2.28 a litre in the coming weeks, De Haan said.

“Diesel is the fuel that powers much of the global economy. Such is true for Canada as well, from trucks to tractors and trains,” he said.

“The Canadian economy moves with diesel, and so the surge in the price of diesel is problematic.”

Global oil prices have been elevated since the U.S. and Israel launched their war on Iran in late February, causing one fifth of the globe’s oil tanker shipments to grind to a halt through the Strait of Hormuz, a vital waterway that links the Persian Gulf to the open sea.

Disruptions have spread to another major Middle East choke point — the Bab el-Mandeb Strait connecting the Red Sea to the Gulf of Aden. Yemen’s Iran-backed Houthi rebels said Thursday they attacked two Saudi oil tankers in the Red Sea.

Ukrainian attacks on Russian refineries are also cutting the supply of diesel and jet fuel to global markets, De Haan added.

The fuel price jolt comes in the thick of the high-demand summer driving season. With travel plans locked down, De Haan said there likely won’t be an immediate change in how much gasoline Canadians buy.

“I don’t think that we’re going to see a significant drop in demand until after the summer driving season is over, until after Labour Day,” he said.

“Then we’re likely will start to see a potentially sizable drop in gasoline demand as Canadians get back to the grind, as schools reopen.”