Yukon Weekly

Why is the price of gas rising despite Canada’s refusal to import Russian oil?

Why are gas prices rising despite Canada's refusal to import Russian oil?

Key Takeaways:

  • Despite the fact that Canada imports very little oil from Moscow, the invasion of Ukraine has resulted in a significant increase in gas prices in Canada.
  • Canada has the world’s third-largest oil reserves, and the majority of its crude oil is refined by Canadian companies.

Although Canada imports very little oil from Moscow, Canada is experiencing a significant increase in gas prices due to Russia’s invasion of Ukraine.

Canada has the world’s third-largest oil reserves and relies on Canadian companies to refine the majority of its crude oil. However, because Canadians consume tens of billions of liters of oil each year, the country also imports crude oil from other nations to meet demand.

In 2020, the United States supplied more than 77% of Canada’s total crude oil imports. Canada imported no crude oil from the Russian Federation in 2020 but imported 3% of its total crude oil from Russia in 2019.

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Despite this, Prime Minister Justin Trudeau announced a ban on Russian crude oil imports on Monday in a largely symbolic move. According to a government source, the Russian oil ban currently only applies to crude oil, but the govt is considering oil derivative products.

Russia has abundant natural resources, including oil and gas, but some foreign buyers are hesitant to purchase any for fear of being subjected to financial sanctions.

“European refiners have already rejected cargoes on the market,” Amy Myers Jaffe, a research professor as well as managing director of Tufts University’s Climate Policy Lab, told reporters. “People are afraid sanctions might come, so they don’t want to be trapped with some cargo they can’t resell.”

Because Moscow’s product isn’t moving on the international market, the already limited global oil supply has shrunk further, putting Canada in a more competitive oil market.

Why are gas prices rising despite Canada's refusal to import Russian oil?
Why are gas prices rising despite Canada’s refusal to import Russian oil? Image from Global News

“We’re starting to emerge from COVID with a likely pent-up demand that’s going to exacerbate that situation,” Dan McTeague, president of Canadians for Affordable Energy, told CTV News on Wednesday. “Then there’s Vladimir Putin, who takes advantage of Europe’s vulnerability and the fact that they need his oil and gas… energy costs have now become a global concern.”

François-Philippe Champagne, the Minister of Industry, told reporters on Parliament Hill on Wednesday that he has started asking the Competition Bureau to keep an eye on gas prices and has spoken to companies about increasing domestic production to offset any potential shortages.

As gas prices continue to rise, Canadians aren’t the only ones feeling the pinch. Russia supplies roughly 40% of the natural gas consumed in the European Union, raising prices across the board.

Aside from Canada, OPEC plans to gradually increase oil production to compensate for the global shortage, which was already in motion before Russia invaded Ukraine due to a lack of oil supply. However, OPEC has only moderately increased its output, which will likely prolong the rise in oil and gas prices.

Source: Global News

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