The price of oil broke a two-year high Wednesday as concerns about the fallout for energy exports from the Middle East stemming from the conflict in Syria pushed up global demand.
And with no clear indication yet whether the immediate crisis in Syria will be short-lived or not, oil prices could be just starting a sharp climb if the flow of oil from the region constricts, some experts say.
Unfortunately for Canadian consumers, that pressure will ripple across the globe and land at your local gas station in the form of higher fuel prices.
“By itself Syria doesn’t really produce enough oil to matter for the world price of oil. But markets are pricing in the probability that this might escalate into something bigger and potentially disrupt oil supplies to a larger extent,” said Ambarish Chandra, professor at the Rotman School of Management at the University of Toronto, and expert on global gas prices.
The price of oil jumped to $109.84 a barrel mid-day Wednesday, its highest price in two years. The bump follows a jump of three per cent a day earlier.
Oil has climbed more than $4 a barrel in recent days over fresh fears that chemical attacks by the Syrian government on its civilians will provoke an imminent Western military response, an event that could trigger a broader conflict in the region.
If that were to happen – with Syrian allies such as Russia and Iran becoming entangled – energy analysts suggest crude prices will jump to as high as $125 a barrel.
The run-up in oil has flown through directly to Canadian gasoline prices at the pumps as suppliers adjust rates, experts say. A litre of gas in Toronto has climbed 3.3 per cent since last Wednesday, according to tracking site tomorrowsgaspricetoday.com. Additional hikes are anticipated, the site said.
“The jump we’ve seen in the last couple of days is showing up at the pump now, or will very soon. And if the price of oil continues to rise, that’ll be reflected in the prices at home almost immediately again,” Rotman’s Chandra said.
Still, gas prices aren’t exactly exploding, while many don’t anticipate oil shooting sharply upward.
In order to inflict meaningful damage on the economy in Canada and abroad, market watchers say oil would have to leap to upwards of $150 a barrel.
“Oil prices will remain high for awhile but I don’t see a spike,” Benjamin Tal, deputy chief economist at CIBC said.
“Quite frankly, Syria is not a major producer. Iran does not have the capacity or willingness to do something. Russia or China will do the talk, they will not do the walk,” the bank economist said.
“I do believe this is a temporary situation.”