Heather Exner-Pirot: Canada's self-imposed high gas prices - National Post
Gas prices have spiked because of the war in Iran. Photo by Gavin Young/PostmediaArticle contentCountries don’t typically get report cards, but there are hard facts that can be collated, assessed and compared. Enter Benchmark Canada, a new project from the Macdonald-Laurier Institute that brings together more than 40 different metrics that measure this nation’s performance. This fall, the National Post is examining many of those findings.
It is a painful experience to gas up these days. Many Canadians have been wondering why we face the same high prices as the rest of the world when we have huge oil reserves and are a net exporter of crude oil and fuels. Some of the cost is due to disruptions to global gasoline and diesel supplies from conflicts in the Middle East and Russia. But part of it is self-imposed through clean fuel regulations. While everyone is paying more at the pump in 2026, Canada does have options to make gas cheaper going forward.
The short answer to why gas costs more is because we are facing an unprecedented energy supply shock, more serious than the 1970s OPEC oil embargo, the 1979 Iranian Revolution or the 2022 Russian invasion of Ukraine. The Strait of Hormuz, the world’s biggest oil choke point, has been disrupted since late February due to the war involving Iran and the United States, and Saudi Arabia’s alternative export route through the Red Sea has been hindered by attacks from the Yemen-based Houthis.
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Although crude exports have meaningfully recovered, supply is still below demand, shipping costs have skyrocketed and refined product exports from the Middle East have risen much more slowly. On top of that, Ukraine has been relentlessly and successfully attacking Russian refineries. While Russia normally exports as much as half of its fuel oil output, production constraints have led it to go so far as to ban diesel exports. Diesel prices around the world have hit record highs and shortages are likely persist into 2027.
Why do these conflicts affect Canadian fuel prices? Canada is not only a large exporter of crude oil, it is a net exporter of finished petroleum products such as diesel and gasoline. However, the fuel market is global. Diesel prices in Canada are determined by the value of diesel in the North American and global markets, not Canada’s domestic balance of production and consumption. Canadian and American refiners respond to international shortages by moving more diesel into markets where it is more scarce, and thus can fetch higher prices.
This normal market response has provoked accusations from the B.C. and federal NDP that refiners are exploiting overseas conflicts and war profiteering. There have even been calls for capping diesel prices and windfall profit taxes. This is not a phenomenon exclusive to the left. U.S. President Donald Trump, being particularly sensitive to the impact of high diesel prices on the upcoming midterm elections, has also floated the idea of an export ban on diesel.
