Oil prices have moved dangerously close to the $100-a-barrel mark again, reviving a problem Canadian households had only begun learning to live with. Brent crude climbed as high as $97.93 a barrel on September 7 after a sharp escalation between the United States and Iran put commercial oil shipping directly in the line of fire.
The latest confrontation included U.S. strikes on three Iranian oil tankers and Iranian attacks on tankers and U.S.-linked vessels. For Canadian motorists, the immediate concern is not whether every disrupted barrel was headed to Canada. It is what nervous traders, refiners and shipping companies now believe those attacks could mean for global supply. Gasoline prices were already elevated before the weekend escalation, leaving relatively little room for another oil shock to pass unnoticed.
The Weekend Attacks Changed the Oil Market’s Risk Calculation
The latest price jump followed a significant escalation at sea. U.S. forces said they struck three Iranian oil tankers on September 5 after American naval vessels had been targeted with ballistic missiles. Two Iranian carriers were described by the U.S. military as permanently disabled, while an unladen tanker was destroyed. Iranian authorities subsequently said their forces had targeted three oil tankers and three U.S. vessels in retaliation.
Oil traders reacted because commercial shipping is becoming increasingly intertwined with the military confrontation. Brent crude reached $97.93 a barrel during September 7 trading, its highest level since July 24, before easing somewhat. Brent had already gained roughly 8% over the previous week, while West Texas Intermediate rose nearly 10%. The important development is therefore not simply one day’s price movement. Repeated attacks on ships can force operators to delay voyages, raise insurance costs or avoid vulnerable routes altogether, tightening physical supply even before an oil field stops producing.
The Strait of Hormuz Remains the Market’s Most Dangerous Chokepoint
The Strait of Hormuz is geographically small but economically enormous. The International Energy Agency says roughly 20 million barrels per day of crude oil and petroleum products passed through the waterway in 2025, representing about one-quarter of global seaborne oil trade. At its narrowest point, the strait is approximately 54 kilometres wide, with much narrower designated shipping channels.
Traffic has already been dramatically reduced by the conflict. Shipping data cited by Reuters showed an average of only about 10 commodity vessels per day crossing the strait during the latest 10-day period, the lowest level since May. Alternative pipelines can help, but their capacity is limited. The IEA estimates Saudi Arabia and the United Arab Emirates have roughly 3.5 million to 5.5 million barrels per day of potential bypass capacity. That is far below the volumes historically moving through Hormuz, explaining why even the threat of prolonged disruption can quickly add a geopolitical premium to crude prices.
Canadian Drivers Were Already Paying for the Iran Conflict
The newest oil surge arrives after months of pressure at Canadian pumps. Statistics Canada’s July Consumer Price Index showed gasoline prices were 25.7% higher than a year earlier, accelerating from a 20.5% annual increase in June. Transportation prices overall were up 7.8%, helping push headline inflation to 3.0% even though inflation excluding gasoline was considerably lower.
By September 7, private fuel-price tracking illustrated how visible the pressure had become. Gas Wizard listed regular gasoline around 187.9 cents per litre in Toronto and 211.9 cents in Vancouver. Those figures vary by neighbourhood and can change rapidly, but they show why another sustained rise in crude matters to household budgets. A driver who commutes daily, a contractor moving between job sites or a family relying on two vehicles experiences fuel inflation differently from an occasional motorist. The price displayed on a station sign can turn a distant maritime confrontation into a recurring weekly expense remarkably quickly.
Being an Oil Producer Does Not Insulate Canada From Global Gas Prices
Canada produces far more crude than it consumes, but that does not mean gasoline can be priced independently of world markets. Canada produced an average 5.35 million barrels per day of crude oil and equivalents in 2025, a national record. Canadian crude exports reached approximately 4.3 million barrels per day that year, with about 90% going to the United States.
Retail gasoline, however, is a globally traded refined product. Canada Energy Regulator analysis has shown that Canadian gasoline prices tend to follow international crude benchmarks such as Brent rather than simply reflecting the price of locally produced oil. Refineries and wholesalers operate in interconnected North American and international markets, meaning Canadian fuel has an opportunity cost linked to what gasoline and crude are worth elsewhere. Consequently, rising Canadian oil production can strengthen export revenue and the energy sector while motorists simultaneously face higher gasoline prices. Those outcomes may feel contradictory at the pump, but both can occur within the same global commodity market.
Ottawa’s Fuel-Tax Relief Provides a Buffer, Not a Shield
The federal government has already intervened to soften the impact of unusually expensive fuel. Ottawa suspended the federal excise tax on gasoline and diesel beginning April 20, eliminating the normal 10-cent-per-litre federal excise charge on gasoline. The measure was initially scheduled to expire after September 7, creating concern that motorists could face a tax increase just as crude prices were climbing again.
That immediate increase is now set to be avoided if Ottawa’s newly proposed extension proceeds as announced. On September 2, the federal government proposed continuing the full suspension through January 31, 2027, followed by a 50% rate from February through March. The policy matters because it removes one component of the pump price, but it cannot control crude markets, refinery margins or wholesale gasoline prices. If Brent remains near $100 or rises further, much of the tax relief could effectively be swallowed by market-driven increases. Fiscal policy can cushion the shock; it cannot make Canada immune to it.
Crude Oil Is Only One Reason Gasoline Can Become Expensive
A barrel of crude is the starting point rather than the final price Canadians see at service stations. Natural Resources Canada breaks retail gasoline costs into crude oil, refining, retail or marketing margins, transportation expenses and taxes. That distinction has become particularly important during the Iran conflict because refinery constraints have sometimes caused finished fuels to rise faster than crude itself.
The Bank of Canada has repeatedly identified elevated refinery margins alongside high crude prices as a reason Canadian gasoline has remained expensive. Refineries convert crude into gasoline, diesel, jet fuel and other products, and disruptions can tighten those markets even when physical crude remains available. Maintenance outages, damaged infrastructure and disruptions to international product shipments can all affect the price refiners are willing to pay or charge. That means Brent could eventually retreat from the high-$90 range without delivering an equally fast decline at Canadian pumps. For consumers, the frustrating lag between falling crude and falling gasoline often reflects these additional links in the supply chain.
Diesel Makes the Oil Shock Bigger Than a Household Driving Problem
Gasoline attracts the most attention because its price is displayed on enormous roadside signs, but diesel can carry a broader economic impact. Trucks move groceries, construction materials, manufactured goods and parcels across Canada, while diesel is also heavily used by agricultural, industrial and resource-sector equipment. Higher fuel costs therefore affect businesses that may never sell petroleum directly to consumers.
The global refined-fuel market is already unusually tight. Reuters reported in September that refinery disruptions connected to conflicts in the Middle East and Russia were affecting fuel supplies, while refiners were adjusting what products they produced in response to unusually strong margins. The Bank of Canada has also noted that businesses have introduced fuel surcharges for some goods and services as energy costs increased. The effect is rarely immediate or uniform. A trucking company may temporarily absorb higher diesel expenses, renegotiate a contract or eventually impose a surcharge. Over time, however, persistent fuel costs can migrate from the pump into freight bills and ultimately the prices of everyday products.
High Oil Prices Create Both Winners and Losers Inside Canada
Canada’s position as a major petroleum exporter makes an oil shock more complicated than a simple national loss. Statistics Canada reported that crude oil and equivalent production reached 25.6 million cubic metres in June, up 3.1% from a year earlier. Exports rose 6.4% to 20.7 million cubic metres, supported by strong international demand during the conflict. In the second quarter, Canada’s exports of crude oil and bitumen reached a record $44.8 billion.
Higher international prices can therefore improve revenues for Canadian producers, support energy-sector investment and increase the nominal value of exports. The benefits, however, are concentrated differently from the costs. A commuter in suburban Ontario or a small delivery company in Atlantic Canada still buys gasoline or diesel at market-linked prices, regardless of stronger revenues flowing to an Alberta producer. Energy-producing provinces can also benefit fiscally through royalties when prices rise. Canada effectively sits on both sides of the oil shock: it is a major seller of crude and a major consumer of globally priced transportation fuels.
Another Oil Surge Complicates the Bank of Canada’s Inflation Fight
Energy prices are again becoming an uncomfortable variable for monetary policy. The Bank of Canada kept its policy rate at 2.25% on September 2 and said headline inflation had been hovering around 3%, mainly because of persistently high gasoline prices. Inflation excluding gasoline was 2.2% in July, while core inflation measures remained close to the Bank’s 2% target.
That difference matters because central banks generally have limited ability to solve a geopolitical supply disruption by changing interest rates. The Bank has indicated it can look through the direct inflationary effect of an oil-price shock, but the calculation becomes more difficult if expensive energy starts spreading into other prices and inflation expectations. Earlier Bank estimates suggested the spring gasoline surge added roughly 1.4 percentage points to inflation at its peak in the second quarter. Another sustained move toward—or beyond—$100 crude could delay the expected easing in headline inflation, particularly if refinery margins and transportation costs remain elevated at the same time.
What Happens Next Depends More on Ships Than Gas Stations
The next direction for Canadian gasoline prices will depend heavily on whether the latest attacks prove temporary or become a sustained campaign against commercial energy shipping. Reuters reported that Goldman Sachs sees oil potentially reaching as high as $120 a barrel if attacks on shipping intensify. That is a scenario rather than a forecast of what must happen, but it illustrates how sensitive prices have become to conditions around Hormuz.
There are forces pushing in the opposite direction. A durable reduction in hostilities could restore tanker confidence and remove part of the geopolitical premium. Additional exports through alternative routes could ease physical shortages. OPEC+ could eventually alter production policy, although the group kept its October policy unchanged at its September 6 meeting. For Canadian drivers, the most important signal may therefore be sustained tanker traffic rather than any single day’s crude quotation. Oil near $98 is already uncomfortable. What would turn that discomfort into a deeper gasoline shock is evidence that ships, refineries and exporters increasingly cannot—or will not—move enough energy through the region.
