A new assessment from DBRS Morningstar suggests that fuel retailers are likely to pass rising wholesale costs directly on to consumers if oil prices remain elevated. Since the initial strikes last weekend, U.S. benchmark crude prices have climbed more than 15 per cent.
On Thursday, oil in New York was trading near US$80 per barrel, with analysts warning that a prolonged conflict could push prices toward US$100. In Canada, average gasoline prices have risen by more than 5.8 per cent.
The conflict has disrupted energy infrastructure across the Middle East. Iran has threatened shipping in the Strait of Hormuz, while natural gas operations in Qatar and Saudi Arabia have also faced interruptions. With supply concerns intensifying, global crude benchmarks have moved sharply higher, feeding through to wholesale fuel markets in North America.
Large fuel retailers like Alimentation Couche-Tard, Seven-Eleven Japan and Casey’s General Stores are not expected to see major impacts on their credit profiles. However, the agency anticipates continued upward pressure on global crude and North American fuel prices. While higher pump prices could modestly reduce fuel volumes, retailers are expected to transfer cost increases to customers.
RBC Capital Markets estimates that average fuel margins fell by about five cents per gallon in late February due to volatile crude markets and sharp increases in wholesale prices. Analysts expect margins to remain unstable as geopolitical tensions evolve, even as underlying demand remains relatively firm.
Industry observers warn that consumers could face a difficult stretch if oil continues to rise. A move from US$67 to US$80 per barrel would translate into roughly a $0.08 per litre increase at Canadian pumps. A jump to US$100 could mean an additional 20 cents per litre. In the U.S., national averages are expected to climb back toward US$3 per gallon, potentially marking the highest levels seen so far this year.
Economists at Desjardins note that while Canada’s resource-heavy economy may benefit from higher oil prices, stronger energy costs would also add to inflationary pressures. For households, another surge in gasoline prices could tighten budgets further in the months ahead.
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