Canada Should Fill Oil Gap to Avoid Global Price Shock

Oil prices have skyrocketed due to the closure of the Strait of Hormuz, but the market is not accurately reflecting the available supply. The physical oil market shows a widening gap between traded price and real scarcity costs, while traders in Manhattan or Toronto are papering over an actual energy crisis with futures contracts.

The U.S. Strategic Petroleum Reserve (SPR) has been depleted to its lowest level since 1983, and officials are now claiming the reserve's capacity is much lower than previously thought. This buffer has already been spent shielding consumers from high prices caused by COVID-19, inflation, Russia's invasion of Ukraine, and the closure of Hormuz.

Experts warn that this is not a recipe for a gentle correction but rather a precursor to a big and rapid price jump, potentially 50% or more. Canada could be supplying oil to meet global demand if it weren't for years of net-zero policies and 'leave-it-in-the-ground' activism.