How the Middle East Conflict is Reshaping Canada's Energy Reality
The ongoing war in the Middle East has fundamentally altered Canada's energy landscape, creating ripple effects that extend from corporate boardrooms to household budgets across the nation. What began as a regional conflict has evolved into a global energy crisis with particularly significant implications for this resource-rich country.
Corporate Responses and Regulatory Challenges
At Irving Oil Ltd.'s headquarters in New Brunswick, executives made an unprecedented request to federal regulators that underscores the severity of the situation. The company sought special permission to use foreign tankers to transport oil from Newfoundland and Labrador to its Saint John refinery, citing the "far-reaching implications for global production, shipping, refining and energy security" caused by the Middle East conflict.
The century-old energy giant emphasized that Canadian ships were unavailable and argued that access to Canadian crude oil was "essential for our customers, for our business and for the broader energy security of Atlantic Canada." This regulatory approval, granted last month, represents just one example of how traditional energy practices are being reconsidered in response to the crisis.
Financial Markets React in Real Time
On Bay Street, financial institutions have been scrambling to respond to the rapidly changing energy landscape. Toronto-Dominion Bank's global commodity strategy team, led by Bart Melek, began emergency briefings within hours of the conflict's escalation, advising clients that oil prices could surge by as much as 50 percent.
"Almost immediately our view was that probably WTI and Brent will be north of US$90 a barrel," Melek explained. The team's analysis focused particularly on the closure of the Strait of Hormuz, through which approximately one-fifth of the world's oil typically flows. "Every day this doesn't come to a resolution, the worse it's going to be," Melek warned, noting that prices could potentially reach US$150 per barrel before demand destruction occurs.
Consumer Impact and Changing Behaviors
For ordinary Canadians, the energy crisis has translated into immediate financial pressure. Gasoline prices surged by a record 29 percent in March alone, with diesel prices exceeding $2 per liter in most cities and reaching $2.79 per liter in Vancouver. These increases have forced consumers to reconsider everything from daily commutes to vacation plans.
Twenty-four-year-old Carter Nesbitt of Saint John exemplifies this new reality. "I've been putting off getting gas, trying to just drive less because it's a little scary trying to work it into my budget when it's already kind of tight," he said while filling his SUV at $1.72 per liter, a price he considered relatively fortunate compared to New Brunswick's average of nearly $1.90. Nesbitt acknowledged he might need to sell his vehicle if prices continue climbing.
Production Responses Across Provinces
In Saskatchewan, oil producers are reconsidering their strategies in light of the crisis. Del Mondor, head of family-owned Aldon Oils Ltd., described his outlook as that of "a raging bull" after initially anticipating a bleak year. His company is now considering doubling its well-drilling plans for 2026, a significant shift from earlier conservative projections.
Saskatchewan Premier Scott Moe emphasized the broader implications, noting that higher oil prices could help shrink provincial deficits while highlighting the need for increased pipeline capacity. "If we're able to get to some agreements with the federal government, we would see significant expansion of the energy industry in Saskatchewan," Moe stated, adding that this would benefit both the economy and job creation.
Agricultural Sector Faces Dual Pressures
The energy crisis has created particular challenges for Canada's agricultural sector. Farmers like Dean Roberts of Coleville, Saskatchewan, are confronting rising costs for both fuel and fertilizer, with urea prices increasing approximately 50 percent during the first three weeks of March.
"We're going to go to the field with a little less nitrogen than we would maybe like," Roberts explained. "But at these prices, if it doesn't rain, I can't gamble." This cautious approach reflects the difficult balancing act facing agricultural producers who must manage input costs while maintaining crop yields.
Investment Strategies and Risk Management
At Alberta Investment Management Corp. (AIMCo), investment teams conducted urgent stress tests on their nearly $200-billion portfolio as the crisis unfolded. Chief Investment Officer Justin Lord described how they modeled various scenarios, including worst-case outcomes where prolonged high oil prices could trigger global recession, stagnant stock markets, and sustained inflation.
"This is where we would be making decisions with respect to any positioning changes or tilts within the portfolio to perhaps protect against any of that risk," Lord explained. The organization's approach reflects the careful balancing act required when managing long-term investments during periods of extreme market volatility.
Workforce Perspectives from the Oilsands
Even in Canada's primary oil-producing region, workers are feeling the pinch. Estella Petersen, who operates heavy equipment in Fort McMurray's oilsands, noted that while she earns good money, rising living costs have tightened her budget. "It's humbled a lot of people," she observed. "There's less travel, and people are talking about their summer holidays. They're going to have it in Alberta. They're not leaving to go out of country."
Industry executives acknowledge that today's energy sector operates differently than during previous booms. "Companies are more measured than they were in past cycles," said Rob Broen, CEO of Athabasca Oil Corp. "We're financially in better shape. We're able to withstand volatility."
LNG Projects Gain New Momentum
On Canada's West Coast, the crisis has accelerated interest in liquefied natural gas (LNG) export projects. With approximately one-fifth of global LNG supplies affected by the Strait of Hormuz closure, Canadian projects are attracting increased attention from international buyers concerned about energy security.
Chris Scherman, Pembina Pipeline Corp.'s chief marketing and strategy officer, noted that "the market is calling for more of those products off the West Coast" and that governments at all levels are aligning behind efforts to expand export capacity. Projects like Cedar LNG in Kitimat, B.C., could potentially earn an additional US$300 million annually at current prices if operational today.
Charitable Organizations Struggle with Costs
The crisis has even affected volunteer organizations. Bob Smith, a driver for the Volunteer Cancer Drivers Society in British Columbia's Lower Mainland, explained how his group is struggling to manage expenses as gas prices exceed $2 per liter in Metro Vancouver. The society recently increased its mileage reimbursement rate to 55 cents per kilometer but must review this monthly as costs continue rising.
"There's no question it is concerning," Smith said, noting that each additional cent in reimbursement adds approximately $12,000 to the organization's expenses.
Long-Term Implications and Uncertain Future
Industry leaders emphasize that the current situation represents more than a temporary disruption. "This is a massive supply disruption that's affecting the entire world," said Grant Fagerheim, CEO of Whitecap Resources Inc. While many companies are maintaining their 2026 spending plans, they acknowledge that prolonged high prices could lead to increased investment in 2027.
The consensus among analysts and executives suggests that Canada's energy sector may experience lasting changes from this crisis. As global buyers reconsider supply chain reliability, Canadian resources could gain new strategic importance. However, this potential comes with significant challenges, including the need for infrastructure investment and careful management of economic impacts on consumers and businesses alike.
The full consequences of this energy shock will likely unfold over months and years, creating what many experts describe as a "new normal" for Canada's energy economy and the millions of Canadians whose lives intersect with it daily.
