The federal government gave financially stretched Canadians a break at the pump a year ago after axing the much-despised
carbon tax
on gasoline, but those gains and then some have evaporated.
Economists and
oil and gas
analysts now expect drivers could be looking at a “new normal” of higher energy prices thanks to a greater risk premium for
oil
even after the dust settles in
Iran
.
“The new normal is not likely to be US$60 a barrel,” Avery Shenfeld, chief economist at CIBC Capital Markets, said in a podcast released on Thursday. “There’s likely to be a remaining risk premium in the energy market, but, say, somewhere between US$75 and US$80 a barrel in the course of the fourth quarter; that’s the base for our forecast.”
Prior to the outbreak of the war, the price for a barrel of
West Texas Intermediate
(WTI), the North American benchmark, was about US$60 a barrel. Prices then rose nearly 70 per cent to a high of US$112.95, but have since come down to around US$90.
Oil prices rose after
Iran effectively closed the Strait of Hormuz, a major gateway for oil and gas supplies to Europe and Asia, removing an estimated 10 million barrels a day of supply from global markets, according to Oxford Economics Ltd.
“When (the war) does come to an end, that risk premium will be higher,” Randy Ollenberger, managing director and oil and gas analyst at BMO Capital Markets, said during a web session with investors, pegging the premium at US$10 from US$5 previously.
Oil futures were signalling to expect higher oil prices through 2026 and 2027, Scotia Capital Markets said.
“The futures curve remains elevated at sustainably higher prices throughout 2026–27,” Derek Holt, vice-president of economics at Scotia Capital, said in a note last week, with futures pricing WTI at more than US$70 a barrel.
Near-term prices reflect the clampdown in the Strait of Hormuz, Douglas Porter, chief economist at Bank of Montreal, said.
“Where you get into talking about a risk premium is when you get two years from now, or maybe even a year from now,” he said, adding that the one-year future price for Brent crude, another oil benchmark, is US$80, up from US$67 just before the war began.
But Porter said an elevated risk premium and higher prices aren’t “foregone conclusions,” though that “is the signal markets are sending to us.”
He said the energy markets reversed themselves in several previous shocks, including the commodity supercycle when WTI prices rose to US$150 a barrel in 2008 and then crashed back down for reasons separate from what spurred the increase.
Similarly, prices in 2014 rose above US$100 on fears that the terrorist group Islamic State of Iraq and Syria would wreak havoc across the Middle East, leading to a permanent increase in oil prices. That was not to be, either.
Porter said oil markets are finely balanced and even a slight drop in demand could have a significant impact on prices.
“The risk is, yes, oil prices will on a semi-permanent basis be pushed up by this,” he said. “You could definitely come up with a scenario where prices retreat very quickly over the next year.”
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Toronto-based Xanadu Quantum Technologies Inc.’s market cap soared to $16 billion on Thursday, making it one of Canada’s most valuable publicly traded technology companies just three weeks after debuting on the Toronto Stock Exchange.
Its valuation rose from $13.4 billion on Wednesday at market close. Xanadu shares have risen 225 per cent in the past three days as of 2 p.m. yesterday — 51 per cent on Thursday — after Nvidia Corp. on Monday released a new series of open-source artificial intelligence models called Ising that are designed to help quantum computing researchers and companies pinpoint and correct errors faster and more accurately in what is known as the decoding process. — Yvonne Lau, Financial Post Read the full story here.
Today’s data: Canada housing starts, international securities transactions
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Today’s Posthaste was written by Gigi Suhanic with additional reporting from Financial Post staff and Bloomberg.
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