With gas prices spiking, Canadians may stop buying. Analysts say it would be a good thing
At gas stations across Canada, the total on the pump is forcing tough tradeoffs. For John Hollinrake, a retiree in Calgary, filling his small sedan now feels like watching a meal slip away. Living on a fixed income and driving a 150-kilometre round trip each day to help a friend get to work, he says higher fuel costs are coming straight out of his food budget. “I can’t afford to eat the food that I want to eat,” he said.
He’s far from alone. As oil prices have surged amid conflict involving the United States, Israel and Iran, Canadians are absorbing a shock that’s lifting the cost of gasoline, diesel and jet fuel. Disruptions and threats around the Strait of Hormuz — a critical passage for roughly a fifth of the world’s oil — have amplified the pressure. Even with periodic ceasefires, the outlook for a quick normalization remains dim, and analysts say the most reliable lever to cool prices may end up being consumers themselves.
Consumers are already adjusting
“Consumers will make the right choices with their dollars and just reduce consumption,” said Susan Bell, senior vice-president at Rystad Energy. “That starts to help resolve the supply-demand imbalance.” With uncertainty hanging over tanker traffic and broader geopolitics, many households are shifting from discretionary spending to essentials, postponing trips, and combining errands. Hollinrake hopes prices fall soon, but he fears it will get worse before it gets better.
Why prices spiked — and how long it could last
Blockages and threats around the Strait of Hormuz have rattled markets. After high-stakes talks between Iran and the U.S. ended without a deal, attention turned to tanker flows through the narrow corridor. At one point, U.S. leaders threatened to block the strait; later, U.S. Central Command indicated it would restrict ships at Iranian ports while allowing non-Iranian traffic. Whatever the final posture, analysts expect any full recovery in supply chains to take months — possibly years — once backlogs clear.
Ripple effects across the economy
For truckers, shippers, retailers and travelers, spiraling fuel costs are immediate and unavoidable. Long-haul driver Zekira Brate, who spends weeks at a time moving loads across the Prairies into the United States, now sees daily diesel bills that make his eyes water. “You used to fill a tank for $1,000; now you’re at like $1,800,” he said.
Carriers are responding by adding or increasing fuel surcharges. “We watched a gas station jump 20 cents a litre in the middle of a meeting,” recalled Murray Mullen, chair and president of Mullen Group. With fuel often making up as much as 30 percent of total operating costs and margins already thin, airlines, railways and trucking companies say they can’t absorb the hit. That means higher shipping and travel costs for consumers — and a slowdown in non-essential spending that can ripple back to freight volumes.
When high prices cause lasting change
Economists warn that beyond a certain threshold, price spikes can permanently reduce demand. Analysts at TD Securities suggested Brent crude sustained at around US$150 per barrel could trigger a durable shift in consumption patterns and eventually force prices down. Kent Fellows, an economist at the University of Calgary, says it’s hard to pinpoint the exact tipping point. “It’s really hard to know what price triggers a response for different people,” he said. But the pattern is familiar: enough consumers cut back, switch to more efficient vehicles, or opt for public transit and carpooling, and gasoline demand drops for good.
Bell expects North American gasoline consumption could fall by roughly 400,000 barrels per day in the coming months if prices stay elevated, out of about 11 million barrels of daily demand. That kind of pullback often starts with the small choices: fewer weekend drives and flights, more ride-sharing — and a rethink at the next vehicle purchase. “The next time I buy a car, maybe I buy an EV, or maybe I buy a four-cylinder instead of an eight-cylinder,” Fellows said.
Life at the pump
For many, the math is unforgiving. Construction worker Tyler Harris says filling his V8 pickup costs him about $120 a week — and plenty of frustration. “I do my best just not to look,” he said. He’s cutting back on fast food and other small luxuries that add up. Truck driver Tyler Fox scans for the cheapest stations he can find and prefers to refuel in the U.S. when long hauls take him across the border. “I’ve never seen prices this high,” he said, noting he’s bracing for a family road trip to Missouri to cost more with each passing week.
Taxes, relief and tough tradeoffs
Canada’s federal fuel tax adds four cents per litre on diesel and 10 cents per litre on gasoline, with provinces layering on their own levies — about 13 cents per litre in Alberta and more than 27 cents in parts of B.C. Some consumers and advocacy groups have called for tax holidays to cushion the blow. Bell cautions that while tax relief can shelter households in the short term, it may delay the very demand response needed to stabilize prices. “A certain amount of energy is a human right, but discretionary energy is not,” she said. “Unfortunately, consumers need to bear the cost.”
The road ahead
After the pandemic’s demand shock and now a supply jolt tied to geopolitical tensions, the global economy is absorbing another heavy hit. “We’ve got a global economy that’s just taken a jab, and now it’s taking a left hook,” Fellows said. The longer high prices persist, the more households, carriers and retailers will scale back, forcing a new balance between supply and demand. Prices won’t rise forever — at some point, people simply stop buying — but how far they eventually fall is anyone’s guess.
For workers like Brate, hauling freight to keep family budgets afloat, there’s little choice but to endure it. “It’s very hard to make a living,” he said. Many Canadians share a simpler wish as they watch the price ticks climb: that relief, and a measure of normalcy, arrives soon.
