Energy industry experts and analysts are cautioning that oil and gas prices are poised to surge due to dwindling reserves and the continued closure of the Strait of Hormuz.
The price of Brent crude futures stood at $98.20 US per barrel on Wednesday midday. However, projections suggest a potential spike to $150 US or higher in the near future. This anticipated price surge is attributed to diminishing hopes for a U.S.-Iran agreement to reopen the Strait coupled with consistent demand in certain markets amidst rapidly depleting reserves.
Neil Chapman, a senior vice-president at ExxonMobil, emphasized the escalating strain on inventory levels during a recent conference in New York. Chapman speculated that prices could soar to the range of $150 US to $160 US within the next few weeks.
Similarly, Chevron CEO Mike Wirth expressed apprehension regarding reserve levels, noting a steady decline in inventories globally. Wirth indicated that inventories might reach a critical low point in June and July.
In response to the ongoing Middle East conflict, member countries of the International Energy Agency agreed in March to release 400 million barrels of oil from emergency reserves. The U.S. Strategic Petroleum Reserve currently stands at 357.1 million barrels as of late May, marking a significant drop from pre-war levels in February 2026. Chevron’s Wirth acknowledged the challenging market conditions, refraining from labeling the situation as a crisis.
With uncertainties surrounding the U.S.-Iran conflict and the ongoing tensions in the region, the outlook for reopening the Strait remains uncertain. Analysts predict prolonged high prices through at least 2027. The possibility of normalizing traffic flow through the Strait by 2027 is contingent upon various factors, including the resolution of conflicts and the resumption of oil production.
Despite escalating fuel prices, consumer demand in Canada remains resilient. However, as oil prices continue to climb, experts anticipate a potential increase in gasoline prices, particularly during the summer peak demand season. The closure of the Strait has not significantly impacted North America, as most oil passing through the Strait is destined for Asia.
While higher oil prices can benefit the Canadian economy to some extent, the impact on consumers is a limiting factor. Concerns over inflation and potential interest rate hikes loom as gas prices surge, prompting policymakers to seek resolutions to the ongoing market turmoil.
