The Very Unexpected Way That Blocking Canadian Oil Exports INCREASES The Price of Gas in Canada By $.15 Per Liter

You would expect that if petroleum products can not be efficiently transported to world markets, that there would be an oil and gas oversupply in Canada and that would drive the prices down.  However, it turns out that two factors cause that not the be the case:

  1. the majority of large petroleum contracts in Canada (and around the globe) are transacted in US dollars
  2. the Canadian dollar is a “petro-currency” meaning that petroleum exports are so important to the economy that the Canadian to US dollar exchange rate swings directly with the price of oil.

This means that if Canada exports less oil, the Canadian dollar goes down in value.  Because we transact in US dollars our oil and gasoline prices go up.  In some cases like we see today, way up.

The estimate today is that this lack of market access for Oil and Gas products costs every Canadian that fills up a vehicle about $.15 per liter.

The CBC video below with Micheal Ervin, the Senior Vice President of Kent Group does a good job of explaining this unexpected behavior in gasoline and diesel prices.

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