How the high price of oil could fuel a recession

追加: 2026-05-18

[00:00:00]The head of the International Energy Agency said that commercial oil inventories were depleting rapidly with only a few weeks worth left due to the closure of the Strait of Hormuz and the war with Iran. The 32 member IEA coordinated the largest ever release of stocks from strategic reserves in March agreeing to withdraw 400 million barrels in a bid to calm markets. Meantime here at home, the price of gas continues to hover near the historic highs with no sign of dropping before the travel heavy summer season kicks off. According to Natural Resources Canada, the cost of regular unleaded gasoline hovered just under $2 a liter across the country late last week. This is the highest prices have been since 2022.

[00:00:44]With me now is former CEO of Canada Energy Regulator Jitendra Silva.

[00:00:48]Jitendra, good morning and thank you for your time.

[00:00:50]Good morning. So, the feds suspended the excise tax to reduce the pain at the pumps we saw a few weeks ago, months ago. With the prices still climbing though, can Ottawa implement some other measures to ease the pain?

[00:01:03]Well, they could look at measures like suspending the GST for example, but I think we have to be realistic about the fact that these prices are going to remain high for quite a while. So, the government will have to determine if um you know, taking off a tax at the pump is the best way to help consumers or if they might want to look at other measures like increasing the GST rebate or the other um initiative we saw to give low-income Canadians a check to help with the price of groceries. So, there's a number of measures that they could look at that are not directly linked to the price at the pump, but would help with the overall increase in the cost of goods.

[00:01:35]Talk to me about the long-term impacts of this energy crisis. While in the short-term we understand that energy producing jurisdictions will gain a lot of revenue, but what happens in the long-term eventually to economy and and the country?

[00:01:48]Well, the longer the price of oil is high because the price of oil impacts pretty much the price of everything else, the greater the potential that you slip into a recession because life just becomes too expensive for everybody, not just the consumer, but for manufacturers and every part of the economy that uses oil as an input. And so, well, you're right, there is a short-term benefit in terms of increased royalty revenue and tax revenue. In the long term, it can becomes very challenging. And so, hopefully we're able to reach a lasting peace agreement in the Middle East soon and get that production back online and moving to markets.

[00:02:20]>> Well, yeah, hopes are high for that one.

[00:02:22]But meantime, Canada, as we know, Japan is among the largest crude oil producers in the world. Is there no way Canada can insulate itself from this current energy oil crisis?

[00:02:34]No, because oil is a global commodity and the price is set on the international market. So, as long as 20% of that supply is not getting to market, and as long as this war continues, the prices are going to remain high and they're going to continue to be volatile.

[00:02:47]Let's talk about what the head of the International Energy Agency say, saying that commercial oil inventories were rapidly depleting. And if we were to be in this stalemate, this deadlock for the next couple of weeks, say, and there is no resolution to what's happening in the Strait of Hormuz, what would be the implications?

[00:03:05]Well, I think you will see parts of the world, increasing parts of the world, start to ration access to gasoline and diesel and cooking oil. We've already seen this in parts of Asia, of course, and conversations around this in Australia. Europe will be next. North America, of course, certainly Western North America is much more insulated just given the volume of production that we have. But if this conflict continues, it is accurate that global reserves are being drawn down to try to manage the situation, but there's only so much that's been put in reserve. And so, once those are depleted, the reality is that the supply, the lack of supply will become even more severe and then prices will continue to increase. So, we'll really have to look at doing what we can on the conservation side to keep keep people and the economy moving. Yeah, challenging times. Former CEO of Canada Energy Regulator, Shashi Silva, thank you for your time and expertise today.

[00:03:58]Thank you. Have a nice day. You too.