As the United States and Israel carry out military operations against Iran, global energy prices have surged, with crude oil now exceeding $100 per barrel. Some experts warn that rising oil prices will drive up transportation costs, which could push up prices for a wide range of goods. Consumers may soon begin to feel the effects of the conflict on supermarket shelves.
As tensions in the Middle East intensify, global oil prices recorded one of the most dramatic weekly increases in decades last week. New York crude futures surged nearly 36 percent in a single week, marking the largest weekly gain since the 1980s. Brent crude also climbed sharply, rising nearly 30 percent.
When trading resumed earlier this week, prices continued to spike. West Texas Intermediate (WTI) crude rose above $111 per barrel, the first time in three and a half years that prices have exceeded the $100 threshold. The magnitude of the increase has been described as historic.
On March 12, the International Energy Agency (IEA) said in its latest monthly oil market report that since the United States and Israel began airstrikes against Iran on Feb. 28, the Strait of Hormuz has remained blocked. As a result, global oil supply in March is expected to decline by about 8 million barrels per day—equivalent to nearly 8 percent of global demand.
Wall Street investment banks have already begun issuing warnings that if shipping through the Strait of Hormuz cannot be restored soon, oil prices may continue to climb and could even challenge the record high of $147 per barrel set in 2008.
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Gas stations feel the pressure first
Patrick De Haan, head of petroleum analysis at GasBuddy.com, said Canadian drivers have already seen gasoline prices rise at one of the fastest paces in years within just a single week.
He said that after additional attacks over the weekend, the fuel market is “rapidly recalibrating” to account for the risk of prolonged disruption.
“As a result, gasoline prices across most parts of Canada may rise another 10 to 25 cents per liter this week, while diesel prices may increase by 15 to 30 cents per liter as the impact of higher crude oil prices moves through the entire supply chain. Although the situation remains highly fluid, Canadian drivers are already beginning to feel the effects as energy markets adjust to this sudden surge.”
Roger McKnight, chief petroleum analyst at energy consulting firm En-Pro, told CityNews that gasoline prices are expected to rise another five cents on Friday, bringing the average price at Toronto gas stations to 155.9 cents per liter.
Food prices may rise 10% to 15%
Andre Cire, a professor at the University of Toronto and a supply chain expert, said the surge in oil prices could soon affect food prices in Canada. If oil prices remain elevated, Canadians’ grocery bills could increase by 10 percent to 15 percent by the end of this month.
“Energy is present in almost every stage. Food must be transported from one place to another, and cargo ships require fuel. As transportation costs rise, we will soon see food prices start to increase as well,” he said.
Moshe Lander, an economist at Concordia University, said the food supply chain from farms to supermarket shelves is already highly complex.
“In Canada, a large portion of food costs is actually transportation. People no longer live near farms the way they once did,” he said.
He added that rising oil prices are likely to affect the food retail sector.
“Canada stretches about 7,000 kilometers from east to west, not to mention the distance from south to north. Many goods must be transported by truck or airplane.”
From manufacturing and transportation to warehousing and logistics, every stage requires fuel. This is especially evident in Canada, where the logistics system relies heavily on road transportation. About 70 percent of freight is moved by truck.
In other words, nearly everything purchased in a supermarket has traveled at least part of its journey by truck. If diesel prices rise, transportation costs will increase.
In the short term, some businesses may absorb part of the cost. But if oil prices remain high for an extended period, those costs will almost certainly be passed on to consumers. Experts say that if oil prices continue to rise, higher prices for many goods may gradually appear in the coming months.
However, one category of goods may rise particularly quickly: fresh produce. The supply chain for fruits and vegetables is shorter and transportation is frequent, meaning that increases in transportation costs can quickly be reflected in supermarket prices.
Long-term inflation concerns
If global oil prices continue to rise, inflation will likely increase as well. Mike von Massow, a food economist at the University of Guelph, said that the longer the crisis continues, the more difficult global transportation could become.
“If transportation times lengthen, we may see freight costs rise, or at least goods arriving later than expected. Supply chain disruptions like this may not be limited to goods transported through the Strait of Hormuz,” he said.
U.S. President Donald Trump said the war could last four to five weeks, or possibly longer.
Professor Cire believes that if the conflict continues for an extended period and oil prices climb further, the consequences for food prices could be “catastrophic.” At present, high oil prices have already created noticeable inflationary pressure worldwide.
“Right now, almost everything is facing upward price pressure,” he said.
“In the short term, we have already seen the impact of rising oil prices. But in the long term, the price of almost everything will increase,” von Massow said. No matter how long the crisis lasts, the uncertainty itself will place greater pressure on consumers’ wallets.
He added, “Even if the conflict were to stop overnight, uncertainty about oil transportation and future oil prices would continue for some time.”
By Li Xin
