Despite oil prices taking a wild ride this week, the latest actions by U.S. President Donald Trump won’t be reflected in the Canadian oil market.
On Tuesday, Trump announced that the U.S. would be pulling out of a 2015 deal with Iran which sent oil prices up to a three-and-a-half year high. But while the overall oil market saw a boost, the long-term impact of the move won’t be felt here in Canada.
Klaus Edenhoffer, Economist at the Conference Board of Canada, says that Iran makes up about 11 per cent of the oil exports from OPEC, about 4.5 million barrels a day, and that most of that supplies China and India.
“We might see a minor reduction in exports from Iran,” said Edenhoffer. “This might affect the oil price a little bit, a dollar or two. But oil prices are high anyway, so it wouldn’t have that much of an effect.”
As for any potential boost the Canadian oil industry will get, it isn’t likely to be much. Edenhoffer says we may see a slight redistribution of the market share, but it will likely be going to the U.S., because Canada isn’t able to export much more oil because the existing pipelines are at capacity.
“Canada has the issue that we don’t have enough pipeline to take advantage of the growing U.S. market,” said Edenhoffer. “And we’re already seeing pressure from the U.S. and increased production. Renewed sanctions against Iran won’t change a whole lot.”
The fluctuating price of oil isn’t likely to throw off Canadian companies, either.
“Canadian oil and gas companies are used to facing market uncertainties, and this is no different,” said Lance Mortlock, EY Canada Oil and Gas Leader. “Companies have learned hard lessons over the last few years. They know oil price stability is likely a thing of the past and that geopolitical uncertainty will remain a constance presence.”
Mortlock says the focus shouldn’t be on predicting the future but standing up to market events like this one. A recent study by EY and the University of Calgary Haskayne School of Business found that reacting appropriately to risks was one of the keys to success for Canadian oil companies.
“Canadian oil and gas organizations that are thriving excel at identifying, mitigating and quickly adapting to risks and challenges as they emerge,” said Mortlock.
Chances are good the average Canadian won’t end up feeling the impact of the U.S.-Iran fallout at the pump. With oil prices and uncertainty already as they are, more volatility won’t raise gas prices much more noticeably than any other factor.