Gas price relief may have been short-lived following new strikes on Iran

Gas prices in Canada are expected to start climbing again as any progress made towards a peace deal between the U.S. and Iran appears to be unravelling.

Consumers should expect to “dig a little deeper” into their wallets, according to a gas price expert.

“A rude slap to the face to start the work week is that the trade deal is now off the table, and we’re kind of back at it. Ground zero starting all over, and the U.S. is not any closer to a peace deal than it was a week and a half ago,” says petroleum analyst Patrick De Haan at GasBuddy.

Global oil markets have been surging ever since shipping traffic was virtually halted in the Strait of Hormuz when the conflict began at the end of February.

Prices for consumer gasoline saw some relief over the past few weeks as a peace deal was reportedly being negotiated, which raised hopes that oil shipments could begin flowing again through the strait and provide some meaningful relief.

But that price relief may have been short-lived.

“If there is no deal, then we are probably worse off every day that this continues compared to where we were a week and a half ago, when it seemed like a deal was on our doorstep,” says De Haan.

“So for motorists, they’re going to have to dig a little deeper again this week.”

On May 29, U.S. President Donald Trump said in a social media post that a U.S. blockade on the Strait of Hormuz “will now be lifted,” contingent on Iran agreeing to terms of a peace deal.

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CAA says the national average for regular grade gasoline currently sits at about CAD$1.69 per litre as of publication. That’s down from $1.81 a week earlier, and $1.90 on May 6.

But on Monday, the U.S. said it had struck several targets in Tehran, and Iran responded by attacking targets in the region, where Kuwait reported incoming fire.

Iranian state television later shared footage of the ballistic missile launch, including a close-up showing a sticker on its body depicting a bruised U.S. President Donald Trump overlaid on a “closed” Strait of Hormuz with the caption: “Until the last American soldier leaves the region.”

Oil prices have been surging in response.

As of publication, U.S. crude oil, known as West Texas Intermediate (WTI), was hovering at over US$94 per barrel, and that’s up roughly nine per cent from as low as $86 on May 29.

“Oil prices had dropped precipitously the last couple of weeks based on U.S. President Trump saying that a deal could be close and imminent,” says De Haan.

“But then over the weekend Iran decided to walk away highlighting new Israeli attacks on Lebanon and oil prices are going right back to where they were prior to all the hopes and dreams over a U.S.-Iran deal.”

Higher prices for crude oil almost always result in more expensive gasoline for consumers.

So how much more should Canadians expect to pay?

De Haan says Canadians should expect gas prices to rise between five and 15 cents per litre in the coming days and weeks, depending on the particular region. He adds that diesel prices may be slower to respond to these recent developments.

In the longer term, De Haan says frustration is mounting on consumers and global markets alike, not only with the geopolitical tensions, but also the uncertainty of when the conflict could ease — if at all.

“This is very much the boy who cried wolf, the president who declared a deal and every single time of the three times this has now happened, we’ve seen nothing coming of it,” he says.

“That could come back to haunt the president especially in the months ahead, as many in the Republican party, his own party, are growing concerned with the prospects of the midterm elections and elevated gas prices that still could reach record levels this summer.”

–with a file from the Associated Press