As the war in Iran continues to jeopardize global oil supplies with no end in sight, consumers in Canada could soon be paying record-high gas prices.
This also comes as the busy summer travel season approaches, which means demand for fuel used in cars and passenger planes is about to peak.
The national average for regular gasoline in Canada sits at about $1.90 per litre, according to CAA, and that’s up from just over $1.70 per litre one month ago.
Gas price experts say we could even see new all-time highs if the strain continues through June.
“If there’s no deal [reached between Iran, the U.S. and Israel] I do expect that over time, the longer the Strait [of Hormuz] remains closed, the higher gasoline and diesel prices will end up going,” says Patrick DeHann, head of petroleum analysis at GasBuddy.
“We could set new all-time records, especially if the Strait remains closed through parts of June — I think that would really increase the odds.”
What is the highest gas price ever seen in Canada?
In June 2022, gas prices were the highest they’ve ever been in Canada, when the economic ripple effects from the COVID-19 pandemic saw a massive spike in inflation worldwide.
Statistics Canada says the national average price for that month hit $2.07 a litre. Some pumps in B.C., where gas prices are among the highest in Canada, exceeded an average of $2.25 in the same period.
GasBuddy data shows the single most expensive day in Canada for the national average was $2.11 on June 10, 2022.
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In almost all cases, prices for diesel gasoline were even higher than regular grade.
This means the national average is roughly 20 cents per litre away from setting a new all-time high in Canada.
How long before gas prices set a new record?
Changes in gas prices are notoriously hard to predict because there are multiple factors at play, including geopolitical tensions that can affect the outlook for how much crude oil and gasoline is available in the world.
The closure of the Strait of Hormuz in the Persian Gulf region means the longer it stays closed, the more likely prices for oil and gasoline will keep going up.
On Wednesday, the International Energy Agency said the loss of supply from the closure of the Strait of Hormuz is “depleting global oil inventories at a record pace.”
DeHaan says at this rate, we could see the national average gas price climb above $2 per litre, or even hit new records in about a month.
“Maybe a little over a month if the Strait continues to be closed for a month; a lot of this is very variable. Markets are resilient. They’re trying to find ways around it,” DeHaan says.
“We’ve never been in a predicament where the Strait has been closed, let alone closed for 12 weeks. So the market is trying to sort it out. I don’t know that we would hit new all-time records and really there’s no telling on how high it’ll go.”
At what point are gas prices too high?
For the most part, prices consumers pay at gas pumps are determined based on future expectations for global oil supplies and the perceived demand.
This means if Canadians are still eager to keep their tanks full, then prices will stay elevated, and if the Strait of Hormuz remains closed, then the amount of gas available may not be able to meet that demand and drive up prices further.
At some point, though, Canadians may find gas prices so high that they will instead choose to consume less gas and forgo some of those travel plans because of the cost.
“If gas prices hit $2.50 a litre, I would suspect that most Canadians are kind of at that point throwing in the towel. That could mean that areas like B.C. could be approaching $3 a litre. And at that time, I think it becomes far too unaffordable for many Canadians to maintain their consumption,” says DeHaan.
“I think consumption would decline significantly at those price points. But it’s not just about Canada when it comes to how high prices will go, it’s about global consumers. Where is the appetite for reducing consumption? That will be the point where prices hit a ceiling.”
If global gas consumption starts to come down, presumably because prices have hit that ceiling, then oil markets may adjust prices lower to encourage consumers back to the pumps.
How to save money while gas prices are high
Until prices for gas come down to more affordable levels, those that need to drive will want to save money wherever possible and adjust their habits to get the most kilometres possible out of every litre.
DeHaan says this boils down to adopting more efficient driving habits, shopping around for the best gas prices available, and taking advantage of loyalty programs.
“Avoiding excess weight in your vehicle…all of that excess weight reduces fuel efficiency. Using cruise control on the highway, trying to slow down here and there, not accelerating as rapidly can have a drastic impact on how many kilometers you get per tank,” he says.
“Whether it’s a personalized price, whether it is a discount for using cash, whether it’s a loyalty program that may reduce prices, there’s a lot of ways to save. But personally, I think shopping around and how you drive play a major role into how much you pay.”
He adds: “Combining trips is another big one. Again, trying to be as most efficient as you can, picking one day out of the week to do all your errands and then planning your route so that it’s as efficient as possible.”
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