It may be a world away and pale in comparison to the human toll, but Russia’s decision to invade Ukrainian territory this week will have many direct and indirect impacts on Canada’s economy.
The most obvious one is on the price of oil. Russia is an energy superpower, and the prospect of Russian exports of energy products like crude oil and natural gas being limited is weighing heavily on markets.
The European oil benchmark, Brent crude, topped $105 a barrel on Thursday, its highest level since 2014. The predominant North American oil blend, West Texas Intermediate, wasn’t far behind, changing hands just shy of $98 a barrel at one point on Thursday.
Short of military intervention, threatening to limit Russian energy exports would be the most powerful weapon that NATO has at its disposal to convince Putin to end his incursion into Ukraine, but because Europe is just as dependent on Russia for oil and gas as Russia is on the revenue from selling it, experts think there’s little chance of that happening.
“The White House has gone to great lengths to convey that it will not target the Russian energy sector and exacerbate an already tight supply situation,” commodity analyst Helima Croft with RBC Capital Markets said in a note to clients early Thursday.
“Though there have been no physical supply disruptions yet, there are serious concerns that Russia could move to restrict commodity exports in response to U.S. sanctions.”
WATCH | Fighting Putin with ‘banks, not tanks:’
‘We have to fight [Putin] with the banks instead of with the tanks’
4 hours ago
Duration 6:30
Bill Browder, head of the Global Magnitsky Justice Campaign, joins Power & Politics to discuss Canada’s sanctions on Russia. 6:30
Russia currently pumps about 10 per cent of the world’s supply of crude oil every day.
Ordinarily, one energy giant turning off the taps would open the door to another opening them, but that’s unlikely to happen with Canada because pipeline and export capacity for oil and natural gas are already stretched to their limit, said Eric Nuttall, a partner and portfolio manager at Toronto-based investment firm Ninepoint.
“That’s an impossibility,” Nuttall said in an interview of the prospect of Canada boosting oil exports to take some leverage away from Putin.
Despite sizeable energy resources in Canada’s oilsands and U.S. shale, Nuttall says the decision years ago to limit pipeline expansions have limited North America’s ability to export as much oil as possible, to the point where both Canada and the U.S. still import oil from overseas.
According to the Canadian Association of Petroleum Producers, Canada imports roughly $550 million worth of crude oil a year from Russia, most of which is consumed in Eastern Canada.
And Nuttall says the U.S. imports even more than that.
“They’re basically contributing $66 million a day into the Russian coffers to empower them to launch cruise missiles into Ukraine when they had a safe and reliable supplier to the north,” he said of the Biden administration’s decision to kill the Keystone XL pipeline once and for all.
Oil prices are headed higher in the short term because of the uncertainty, but a long term military conflict in the region would be a negative for oil prices over the long term because it would slow down the global economy, said Barry Schwartz, chief investment officer at Baskin Financial.
“No one should be giddy about oil,” he said in an interview. “It’s possible that oil prices continue to rise as world events continue to be uncertain, but ultimately if [the] invasion continues, if it worsens, the economies around the world are going to slow dramatically and that is a terrible scenario for oil.”
Higher food prices
Energy may be the most direct impact, but global food markets will be affected, too. Often called the “breadbasket of Europe,” Ukraine is a major global supplier of crops like corn and wheat, and Russia is not far behind.
Combined, the two countries produce about 25 per cent of the world’s supply of wheat, and Croft at RBC says those supplies are now in doubt because of Russian aggression.
“Given the recent Russian Black Sea naval deployments, we think there is a considerable risk that Ukraine’s ports may be inoperable,” Croft said.
As a major wheat exporter, Canada will feel that part of the conflict directly.
“If Europe is not able to get Ukrainian wheat, they’re going to be looking for some somewhere else,” said David Quist, executive director of the Western Canadian Wheat Growers Association, in an interview.
“If Ukraine, which is a major grower exporter, is not producing this year, there’s going to be a global shortage. And so that will cause prices to rise.”
WATCH | How conflict in Ukraine will impact wheat prices in Canada:
Ukraine conflict could cause wheat price to spike, food prof says
8 hours ago
Duration 1:27
With Russia and Ukraine being major exporters of wheat, people can expect the price of wheat to go up and for buyers to shift their purchasing toward other markets, says the University of Saskatchewan’s agricultural economics professor Richard Gray. (Photo credit: Orlin Wagner/The Associated Press) 1:27
They already are. Wheat prices have risen by 15 per cent in the past month alone, on the assumption that two of the world’s biggest wheat crops may be unreliable in the short term at least, and potentially the long term, too.
“If it’s a prolonged war and there it’s disrupted, it could disrupt production for this spring or in coming years,” said Richard Gray, a professor of agricultural economics at the University of Saskatchewan.
Higher prices for wheat may be good news for farmers, but it means consumers in Canada and abroad should brace themselves for even higher food prices to come.
Gray says a loaf of bread may contain only about 40 or 50 cents worth of wheat, “so the impact won’t be very large directly, but indirectly you’re going to see some increase in cereal prices, some increase in other food products.”
Inflation and rate hikes
Higher food prices are one of the biggest factors that have been driving up inflation to multi-decade highs lately, a trend that central banks were on track to imminently tackle by raising their interest rates.
While rate hikes are still expected, the sudden outbreak of war in Ukraine has changed the plans a little, economist Royce Mendes with Desjardins says.
The Bank of Canada is set to announce its latest interest rate decision next Wednesday, and it is widely expected to raise its benchmark rate by at least a quarter of a percentage point, to 0.5 per cent.
Freeland says sanctions on Russia’s oligarchs will have a ‘real impact’
8 hours ago
Duration 1:07
Deputy Prime Minister Chrystia Freeland discusses new sanctions targeting Russian oligarchs. 1:07
“Rock bottom interest rates seem inconsistent with elevated levels of inflation, so we expect the normalization process for interest rates to begin in the next few weeks and actually continue at least gradually throughout the year,” Mendes said in an interview.
“But there are certainly more question marks about that process than there were just a few days ago.”
While expectations of how many hikes are coming and how fast are lower today than they were just 24 hours ago, investors in both Canada and the U.S continue to expect about a half dozen rate hikes in Canada and the U.S. by the end of the year, trading in investments known as swaps suggest.
Not even the shocking prospect of a military conflict in Europe is likely to compel central bankers to deviate from their plans to rein in inflation, but the path forward is still anything but certain — so Canadian consumers should brace themselves for uncertainty from this conflict a world away.
“A conflict that can seem so far away at times for many Canadians might hit home in terms of the prices they’re paying for everyday goods,” Mendes said.
“We should expect that we’re going to see higher prices at the pump and potentially higher prices at the grocery store as a result of this conflict.”
A worker walks along an access platform at the Gazprom facility in Siberia. As a major world supplier of oil and natural gas, the Russian invasion of Ukraine will have a global impact on energy markets. (Andrey Rudakov/Bloomberg)
Oil prices initially spiked on Friday due to unconfirmed reports of an Israeli missile strike on Iran.
Prices briefly reached above $90 per barrel before falling back as Iran denied the attack.
Iranian media reported activating their air defense systems, not an Israeli strike.
Oil prices gave up nearly all of early Friday’s gains after an Iranian official told Reuters that there hadn’t been a missile attack against Iran.
Oil surged by as much as $3 per barrel in Asian trade early on Friday after a U.S. official told ABC News today that Israel launched missile strikes against Iran in the early morning hours today. After briefly spiking to above $90 per barrel early on Friday in Asian trade, Brent fell back to $87.10 per barrel in the morning in Europe.
The news was later confirmed by Iranian media, which said the country’s air defense system took down three drones over the city of Isfahan, according to Al Jazeera. Flights to three cities including Tehran and Isfahan were suspended, Iranian media also reported.
Israel’s retaliation for Iran’s missile strikes last week was seen by most as a guarantee of escalation of the Middle East conflict since Iran had warned Tel Aviv that if it retaliates, so will Tehran in its turn and that retaliation would be on a greater scale than the missile strikes from last week. These developments were naturally seen as strongly bullish for oil prices.
However, hours after unconfirmed reports of an Israeli attack first emerged, Reuters quoted an Iranian official as saying that there was no missile strike carried out against Iran. The explosions that were heard in the large Iranian city of Isfahan were the result of the activation of the air defense systems of Iran, the official told Reuters.
Overall, Iran appears to downplay the event, with most official comments and news reports not mentioning Israel, Reuters notes.
The International Atomic Energy Agency (IAEA) said that “there is no damage to Iran’s nuclear sites,” confirming Iranian reports on the matter.
The Isfahan province is home to Iran’s nuclear site for uranium enrichment.
“Brent briefly soared back above $90 before reversing lower after Iranian media downplayed a retaliatory strike by Israel,” Saxo Bank said in a Friday note.
The $5 a barrel trading range in oil prices over the past week has been driven by traders attempting to “quantify the level of risk premium needed to reflect heightened tensions but with no impact on supply,” the bank said, adding “Expect prices to bid ahead of the weekend.”
At the time of writing Brent was trading at $87.34 and WTI at $83.14.
Premier David Eby is warning real estate investors and speculators that his government is tilting the rules toward families seeking homes as it tightens the rules on short-term rentals.
Eby said Thursday that the rule changes on May 1 will limit short-term rental units to within the principal home of a host, but the move isn’t a ban on platforms such as Airbnb if they aren’t used to create de facto hotels from B.C.’s housing stock.
“If there’s a major event [such as a] Taylor Swift concert, a FIFA-like event and somebody wants to rent out their primary residence and go away for the weekend to avoid the crush of the crowds, they can still do that,” Eby said.
The changes were announced by the government last spring, giving those who own short-term rentals a year to conform.
Eby said the changes will allow both the province and local governments to crack down on speculators.
“If you’re flipping homes, if you’re buying places to do short-term rental, if you’re buying a home to leave it vacant, we have consistently, publicly, repeatedly sent the message: Do not compete with families and individuals that are looking for a place to live with your investment dollars.”
Eby made his comments as the province announced new figures gathered in March that showed more than 19,000 entire homes being listed as short-term rentals.
Housing Minister Ravi Kahlon said the new rules also require short-term rental platforms such as Airbnb to share listed property data with the province and local governments.
He said they expect a significant amount of the homes listed on short-term sites to be back in the long-term rental pool.
“Our view is even if half of those units were to come back onto the market, that is substantial,” Kahlon said. “The cost that it takes to build new housing, when you can get even half of the 19,000 back on the market, that’ll make a substantial difference in our communities.”
He said previous efforts to limit short-term rentals are increasing housing supply in some places.
“We’re seeing, already, in many communities that action happening,” Kahlon said. “We have heard many stories of people finding rentals now because of opportunities when it comes to short-term rentals coming onto the market.”
The new principal residence requirement for short-term rentals will allow local governments to request that a platform remove listings that don’t display a valid business licence.
Valid short-term rental hosts will also be required to display a business licence number on their listings if a licence is required by local government.
The new rules will apply to more than 60 B.C. communities, and Kahlon said a compliance enforcement unit will be phased in to help municipalities deal with rule violations.
Much of the monitoring and enforcement, however, will be conducted online through a new rental data portal that will allow local governments to track and request removal of listings from platforms.
“With this new digital portal, local governments will be able to upload, within moments, listings that they believe are operating illegally within their community,” Kahlon said.
The platform will have five days to remove listings that aren’t following the rules, and if they don’t, they will be fined, he said, noting there’s an up-to-$10,000-a-day-per-listing fine for platforms that don’t co-operate.
“We believe that’s enough of a deterrent for the platforms to co-operate with local governments,” said Kahlon
A website launched Thursday for hosts will allow them to get information about their requirements from the province and their municipality, and their responsibility to notify anyone that’s booked.
“Hosts and platforms have a responsibility to notify anyone that’s booking of all the changes that have been coming,” said Kahlon. “They’ve been notified about this since September or October when the legislation has come in, and they’ve had plenty of time to set up their policies to do that.”
The rules do include some exceptions, including some strata hotels and motels operating before last December being exempt if certain criteria are met.
Eby said the overall message to property investors looking for short-term gains is clear: Build homes that people need and government will do all it can to help expedite the process.
“But if you are standing neck and neck with a family that’s looking for a place to live, and you’re trying to do a speculative investment, [while] they’re looking for a place to live, we are going to tilt the deck every single time towards that family,” Eby said. “And we’re gonna keep doing it.”
Eby also said a positive side-effect of short-term rental regulation has been the re-emergence of hotel construction, with 1,400 rooms “in the development pipeline” in Vancouver.
“Those investors in those hotel rooms weren’t able to make the decision to proceed,” Eby said, citing the previous competition from short-term rentals. “Very clearly, with these regulations in place, there will be visitors to stay in hotel rooms, there will be a market for hotel rooms and they’re making the decision to proceed. This is very good news.”
Victoria-based Property Rights B.C. has filed a lawsuit against the province and city of Victoria to fight the new regulatory system.
It maintains the province overstepped its authority and its lawsuit is focused on preserving the rights to own and operate short-term vacation rentals. The organization is also seeking a delay in enforcement.
Asked about the lawsuit, Eby said he can’t comment on a matter that’s before the courts, “but what I can say is we’re very confident in the legal authority of the province to regulate the housing sector in this way and we’ll make the arguments that are needed in court to address that.”
More communities initially exempt from the province’s new regulations have opted in, including Gabriola Island, Mill Bay/Malahat, Cobble Hill, Cowichan Station/Sahtlam/Glenora, Cowichan Lake South/Skutz Falls, Saltair/Gulf Islands and North Oyster/Diamond. Tofino previously announced it would opt in.
Municipalities with fewer than 10,000 people, resort communities and regional districts are exempt from a requirement restricting short-term rentals to principal residences and either a secondary suite or laneway home/garden suite.
On Thursday afternoon, En-Pro International posted on X that “gas prices spiked 14 cents overnight, the largest single day jump since early 2022.” (AP Photo/Jenny Kane) (The Associated Press)
Gas prices across Canada climbed an average of 9.4 cents per litre of regular fuel over the past seven days, the biggest weekly gain so far in 2024. Cities in Ontario and Quebec booked eye-watering 20 cent-plus gains, while prices were virtually flat for drivers in the Western and Maritime regions.
The average cost per litre of regular gasoline in cities nationwide rose to $1.806 from $1.712 between April 11 and April 18, according to data firm Kalibrate. Chicoutimi, Que. saw the biggest increase at 26.7 cents per litre, followed by Gatineau, Que., and North Bay, Ont. The Greater Toronto Area was hit with widespread gains above 15 cents per litre.
On Thursday afternoon, En-Pro International posted on X that “gas prices spiked 14 cents overnight, the largest single-day jump since early 2022.”
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“The steady build in U.S. crude inventories, combined with the reluctance of the Fed to lower interest rates, which would increase gasoline demand, should neutralize the impact of the conflict in the Middle East,” En-Pro chief petroleum analyst Roger McKnight wrote in a blog post.
“The refining industry will come back to normal levels by mid-June, so supply will balance demand, and prices should fall soon after the U.S. Memorial Day launch of summer.”
Rising gas prices was the top factor behind Statistics Canada’s slightly higher annual inflation reading for March. Year over year, the agency found gasoline prices increased 4.5 per cent last month, following a 0.8 per cent rise in February.
“Higher global prices for crude oil stemmed from supply concerns amid geopolitical conflict and continued voluntary production cuts, leading to higher prices at the pump,” StatCan said on Tuesday.
Follow Yahoo Finance Canada for more weekly gas price updates. Scroll below to find your nearest city.
(All figures in CAD cents)
LOCATION
April 11
April 18
Price change
Canada Average (V)
171.2
180.6
9.4
WHITEHORSE
189.9
189.9
0
VANCOUVER*
210.7
212.7
2
VICTORIA
206.2
206.9
0.7
PRINCE GEORGE
169.6
169.3
-0.3
KAMLOOPS
172.5
181
8.5
KELOWNA
174.6
175.8
1.2
FORT ST. JOHN
171.2
174.9
3.7
ABBOTSFORD
194.2
198.5
4.3
YELLOWKNIFE
161.9
161.9
0
CALGARY*
161.2
158.8
-2.4
RED DEER
159
159
0
EDMONTON
154.9
153.6
-1.3
LETHBRIDGE
161.9
161.9
0
LLOYDMINSTER
154.6
154.6
0
GRANDE PRAIRIE
156.9
158.7
1.8
REGINA*
158
157.3
-0.7
SASKATOON
157.4
156.9
-0.5
PRINCE ALBERT
154.6
155.8
1.2
MOOSE JAW
158.7
158.7
0
WINNIPEG *
141.4
141.6
0.2
BRANDON
142.5
143.3
0.8
CITY OF TORONTO*
163.7
179.3
15.6
BRAMPTON
164.3
179.6
15.3
ETOBICOKE
163.4
179
15.6
MISSISSAUGA
162.8
179.3
16.5
NORTH YORK
163.9
179.6
15.7
SCARBOROUGH
163.3
179.5
16.2
VAUGHAN/MARKHAM
163.5
179.2
15.7
OTTAWA
162.4
179
16.6
KINGSTON
162.3
179.3
17
PETERBOROUGH
160.1
172.2
12.1
WINDSOR
162.4
177.8
15.4
LONDON
163.5
177.4
13.9
SUDBURY
167.4
185.8
18.4
SAULT STE MARIE
160.2
174.3
14.1
THUNDER BAY
165.8
175.5
9.7
NORTH BAY
161.5
182.6
21.1
TIMMINS
169.7
183.6
13.9
HAMILTON
161.6
178
16.4
ST. CATHARINES
160.4
177.1
16.7
BARRIE
162.8
178.2
15.4
BRANTFORD
161.1
176.2
15.1
GUELPH
163.4
178.4
15
KITCHENER
163.1
179
15.9
OSHAWA
163.8
179.4
15.6
SARNIA
161.7
178.9
17.2
MONTRÉAL*
173.7
190.5
16.8
QUÉBEC
172.1
187.4
15.3
SHERBROOKE
169.5
185.3
15.8
GASPÉ
172.7
189.4
16.7
CHICOUTIMI
155.1
181.8
26.7
RIMOUSKI
169.4
189.4
20
TROIS RIVIÈRES
169.8
186.7
16.9
DRUMMONDVILLE
166.7
183.9
17.2
VAL D’OR
169.6
182.7
13.1
GATINEAU
152.7
175.9
23.2
SAINT JOHN*
175.1
179.1
4
FREDERICTON
176.6
181.7
5.1
MONCTON
176.8
181.9
5.1
BATHURST
176.8
182.3
5.5
EDMUNDSTON
175.2
175.8
0.6
MIRAMICHI
177.9
183.1
5.2
CAMPBELLTON
175.7
179.9
4.2
SUSSEX
176.2
181
4.8
WOODSTOCK
177.8
183.1
5.3
HALIFAX*
172.1
175.4
3.3
SYDNEY
174.1
177.2
3.1
YARMOUTH
173.2
176.3
3.1
TRURO
173.3
176.4
3.1
KENTVILLE
172.7
175.8
3.1
NEW GLASGOW
173.3
176.4
3.1
CHARLOTTETOWN*
173
173
0
ST JOHNS*
190.4
193.9
3.5
GANDER
192.9
196.4
3.5
LABRADOR CITY
197
200.5
3.5
CORNER BROOK
191.1
194.6
3.5
GRAND FALLS
192.9
196.4
3.5
SOURCE: KALIBRATE • All figures in CAD cents
(*) Denotes markets used in Volume Weighted Canada Average
Jeff Lagerquist is a senior reporter at Yahoo Finance Canada. Follow him on Twitter @jefflagerquist.
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