The U.S.-Israel conflict with Iran is causing a significant surge in diesel prices across Canada, rising by almost 30% since the conflict began. This week, the average retail price of diesel hit $2.19 per liter, marking the highest price since 2022 when Russia invaded Ukraine. In comparison, regular gasoline is currently selling for an average of $1.75 per liter at fuel stations, according to Kalibrate Canada, a fuel data and analytics firm. The sharp increase in diesel prices is anticipated to lead to higher shipping expenses, as diesel is crucial for the transportation sector in moving trucks, trains, and barges.
Andrew Lipow, president of Lipow Oil Associates, emphasized the significance of diesel prices, stating that they impact the delivery of consumer goods and services. Various sectors such as farmers, trucking companies, and transit groups are already feeling the financial strain from the price hike, with experts warning that these increased costs may eventually be passed on to consumers.
The spike in diesel prices was immediately evident to Trevor Wideman, sales manager at West Coast Transportation in London, Ont. He noted that conflicts in the Middle East typically result in instant rises in oil and fuel prices. As transportation companies pass on these expenses, the increased costs eventually reach consumers, affecting everyday purchases from groceries to manufacturing supplies.
The highest average diesel price on Tuesday was recorded in Chicoutimi, Que., at $2.49 per liter, while Grande Prairie, Alta., had the lowest price at $1.85 per liter. Dennis Darby, chief executive of the Canadian Manufacturers and Exporters, highlighted the challenges faced by companies dealing with tariffs, noting that high diesel costs escalate transportation expenses and impact production processes in some facilities.
The closure of the Strait of Hormuz due to the Middle East conflict has disrupted a vital shipping lane responsible for a fifth of the world’s oil and natural gas. Consequently, North American oil prices have surged by almost 50% since the conflict erupted. Lipow mentioned that trucking and rail companies are already implementing fuel surcharges to cope with the rising costs. Additionally, concerns are growing about the upcoming agricultural season, with farmers preparing for spring planting using more expensive diesel fuel and fertilizer, potentially leading to higher food prices.
Given the ongoing conflict in Iran and the disruptions to crude oil production and exports of diesel and jet fuel from the Middle East, Lipow anticipates that diesel prices will continue to rise. The prolonged nature of the conflict and reduced refinery operating rates in Asia further exacerbate the supply shortage, indicating a persistent impact on diesel prices in the foreseeable future.