While Israel and the US are dealing with a forty-seven year old problem, Canada cannot decide which side to be on or even if Canada should be involved in this game-changing conflict.
(Sidebar: it certainly won't turf people who shouldn't be here in the first place.)
In the vacuum, Canada is not ready to step in where it could if it were able: oil.
Decades of whittling the armed forces to nothing and a deliberate decision to keep as much oil in the ground as possible have made Canada even more functionally useless than before:
The folly of Canada’s last decade of energy policy is a never-ending saga for which the costs to Canadians and Canadian industry seem only to rise. As the price of a barrel of oil and LNG skyrocket due to American and Israel military action in Iran and its fallout, Canada should be sitting on a massive opportunity to benefit from soaring prices. However, a decade of neglect and underinvestment in pipelines and egress capacity sees us looking wistfully on as other nations, such as the Untied States benefit while we toil away for little gain.
The simple reason for the LNG and oil spike is that Iran’s retaliation has effectively shut the Strait of Hormuz. A critical link in the world’s energy supply chain, connecting the Persian Gulf with the rest of the world, around 20–22 million barrels of oil, or roughly 20 per cent of global oil consumption, passes through the Strait each day. Qatar supplies approximately 20 per cent of global LNG supply, which also transits the Strait. The Strait of Hormuz is not an area which generally receives much attention from the broader public unless something is seriously off, so when you see those words populating your social media feed, you ought to know something is wrong in the world. Indeed something is very wrong: tankers are trapped and so is the oil and gas.
As a result of the Strait’s closure, a huge portion of the Middle East’s oil and LNG production, which normally leaves via tanker, can’t go anywhere. The situation is dire. Early Sunday the price of a barrel of oil went negative on the “trapped” side of the Strait, meaning producers are paying customers to take the oil away, because they can’t sell it elsewhere. It doesn’t take a genius to know that this means producers will stop producing to save money, and indeed this has already happened. On March 4, Qatar shut down natural gas production, on March 7 the Kuwait Petroleum Company cut oil production and declared force majeure, an emergency contractual clause that allows companies to suspend obligations such as delivery when faced with uncontrollable events such as war. On March 8, it came to light that Iraqi oil production had fallen from 4.3 million barrels per day to 1.3 million. It is anticipated that more companies and countries will cut production and declare force majeure in the days to come.
This is all a catastrophe for the world energy markets, which were already relatively tight. In response to the situation the price of a barrel of oil has already gone up over $20 a barrel in the past two weeks. Sunday afternoon, the price of both Brent Crude and WTI — both key global oil benchmarks — went over $100/barrel, and there are signs this will slow down, unless the Strait of Hormuz is immediately re-opened.
However, there ought to be more opportunity for Canada. While Canadian producers still benefit from higher oil prices for their existing production, the Canadian oil and gas industry ought to be benefitting more. Our failure to build pipelines to access markets other than the United States will have huge financial implications.
By deluding ourselves that “there was no business case” for LNG or that the world would not want more Canadian oil, we have literally cost ourselves billions of dollars. This should be a national scandal. While the current government has tried to reverse the failed policy of the past, so far nothing has actually been built or accomplished.
Looking back, recent years and decisions make for dark reading. When Germany came to Canada in 2022 looking for LNG we pushed them away. Where did they go? Qatar, that’s where. That Qatari LNG to Germany is now trapped as Qatar has been forced to shut down LNG production. Do we not believe Germany and Europe would rather get LNG and oil from Canada rather than from a clearly much more unstable region like the Middle East? Of course they would, but we were too myopic and foolish to get out of our own way to build the infrastructure we need to get our most valuable resource to market.
In the last 10 or so years Canada has made policy mistakes that have caused the country to lose billions of dollars, by turning away from economic prosperity in favour of failing battery plants and other unprofitable green energy fantasies. Politics over economics has cost us dearly, we cannot miss the opportunity and the message again. Build the pipelines and get our oil and gas to market.
Don't think for one moment that Canada is ready to step in.
It always lets everyone down.
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The greatest threat to Canadians emerging from the war in Iran is domestic terrorism.
While all Canadians are vulnerable given that Iran is the world’s leading state sponsor of global terrorism, two groups are the most vulnerable.
They are Canadians of Iranian origin who oppose the Islamist dictatorship in Iran, and Jews.
Attacks on both groups have already started just one week into the war and the longer it goes, the greater the threat will become.
Within hours of the death of Iranian Supreme leader Ayatollah Ali Khamenei on Feb. 28 following the joint U.S.-Israel attack on Iran, the Saliwan Boxing Club in Richmond Hill, owned by Salar Gholami, a prominent Iranian human rights activist, was sprayed with 17 bullets.
Three synagogues have already been hit by gunfire since the war began – Beth Avraham Yoseph in Thornhill and Shaarei Shomayim in Toronto, sometime between March 6-7, and Temple Emanu-El in North York, on March 2.
No one was hurt but we all know this is just the start of what’s coming.
We sure do.
**
Oh, look - things are going to get more expensive:
Fertilizer markets are particularly vulnerable. The Middle East is a major exporter of urea and ammonia, both critical for global crop production. Any sustained disruption will push input costs higher.
Canadian farmers try to shield themselves from volatility by pre-buying inputs months ahead. But they are not fully protected. Some fertilizer is locked in early, but other purchases remain exposed to global price swings.
Diesel, meanwhile, is the real wild card.
Energy markets have already reacted. Oil is up about 13% since Monday. Natural gas prices in some regions have jumped 30%. Diesel prices are climbing between 8% and 13%. Agricultural commodities – wheat, soybeans, milk – are edging upward, but markets are not panicking.
For Canada, the concern is transportation costs across the food supply chain.
If diesel were to spike 25% under a prolonged Iran conflict scenario – combined with Canada’s scheduled industrial carbon price increase on April 1 – the effect on food inflation could be noticeable. The country’s industrial carbon price will rise from $95 to $110 per tonne. Yes, it is still there. Someone in Ottawa once referred to it as “shadow taxing.”
Our models suggest this combination could add 0.4 to 0.7 percentage points to national food inflation by May or June. That may not sound dramatic. But every percentage point of food inflation translates into roughly $150 to $200 more in annual food spending for the average Canadian household. Fresh produce and meat would likely feel the pressure most.
And Canadians are already under strain.
According to the latest data from Statistics Canada, food prices are currently rising at 7.3% year-over-year – far above the country’s overall inflation rate of about 2.3%.
In other words, the system is already running hot.
But carbon pricing is only one part of the equation. Fuel used across the food system – from farm equipment to trucks, rail and processing facilities – is also subject to other levies, including federal excise taxes, provincial fuel taxes, and sales taxes such as GST or HST applied to fuel purchases. …
Individually, these costs may appear manageable. But together they compound. When global energy prices rise at the same time as domestic fuel-related taxes remain embedded throughout the supply chain, the pressure on food production, processing and transportation costs increases as well.
Still, energy shocks alone rarely drive long-term food inflation. Exchange rates, labour costs, and global commodity markets typically matter far more. What matters most now is duration.
If the conflict fades quickly, the market impact will likely remain limited. If it drags on, costs will ripple through global supply chains.
Global energy shock. Domestic carbon tax hike.
Lovely timing.
