○last month’s versionoil prices bounced around like a lie detector. The joint U.S.-Israeli attack on Iran, which began in February, triggered the biggest one-month price increase in oil history. The price of Brent crude oil rose and fell sharply each time a war broke out.
Important points
- Due to the Iran war, oil price fluctuations have recently intensified around the world.
- Global financial institutions have consistently identified rising oil prices as the main driver of inflation.
- Risks of dependence on other countries’ oil have led some countries to expand their use of renewable energy
Just as Russian President Vladimir Putin invaded Ukraine in 2022, cutting off Russian oil and gas from Europe and causing oil prices to soar, the Iran war has led to two wildly contradictory conclusions about humanity’s relationship with oil. first: Hooray, oil prices have risen. Produce more and earn cash! And second: No, with oil prices soaring, it’s time to accelerate the energy transition.
For oil-producing countries, both arguments have merit. For such a price you certainly get a lot of money. And everything is becoming more expensive. Also.
This simple trade-off is so obvious that high oil prices create both wealth and inflation. That’s wrong. Instead of emphasizing their connection, journalists and politicians tend to treat both sides of the ledger as if they occupy separate realities.
This two-brained thinking primarily affects the citizens of oil-producing countries, where certain vested interests have a long history of concealing certain facts. Let’s take Canada as an example. The last time oil prices exploded was in 2022, which also led to inflation here and around the world. The COVID-19 pandemic was a big factor, but so was the sudden rise in energy costs. Did Canada’s public debate highlight the transparent link between record profits for oil companies and a high cost of living? No, we blamed the carbon tax, the greenhouse gas emissions levy that the federal government introduced in 2019. The carbon tax was subsequently abolished in April 2025. Nothing changed. By that time oil prices and inflation were already falling. Even petrol prices, which briefly fell, are higher today than they were before Prime Minister Mark Carney scrapped consumer prices based on carbon prices.
A more holistic look at the rise in oil prices highlights the real question: “Is the windfall worth the trouble?”
In Canada, the world’s fourth-largest oil producer, fossil fuel royalties typically contribute about $12 billion annually to all levels of government. In 2022, the most profitable year in the industry’s history, that amount has jumped to nearly $34 billion. Most of it went to Alberta, where oil and gas accounted for a third of the province’s revenue that year.
Meanwhile, the federal government made nearly $10 billion from oil and gas in 2022. Ottawa’s total revenue in 2022 was $448 billion. This means that in the best year ever for the oil industry, fossil fuels generated just over 2 percent of the federal government’s operating revenue.
On the other side of the ledger, Jim Stanford, a prominent Canadian economist and director of the Future Work Center, calculates that high oil prices cost Canadian consumers a total of $200 billion between 2022 and 2024, or $12,000 per household. It wasn’t just gasoline and home heating. Expensive oil and gas pushed up nearly every component of the consumer price index, including interest rates.
While some may dispute Stanford University’s specific numbers, no serious financial analyst doubts the outsized role that energy prices play in the global economy. Trevor Tombu, another prominent economist at the University of Calgary, estimates that oil prices accounted for about a third of Canada’s record inflation in 2022. Bank of Canada Governor Tiff Macklem, like the heads of virtually every major financial institution on the planet, has consistently identified high oil prices as a major driver of inflation.
But one thing they rarely mention is climate change. Over the past decade, extreme weather events have devastated global crops and driven up food prices everywhere. This was another major factor behind record inflation in 2022. That summer, a continuing drought across California and Arizona caused vegetable prices in the United States to rise by 80%, while a similar drought in Europe caused olive oil prices to rise by 50%. The previous summer, a drought in Western Canada reduced wheat yields by more than a third. These effects are cascading across the globe, wiping out everything from cabbage in South Korea to rice in India to cocoa in West Africa.
In other words, it’s not just grocery stores that are driving up food prices. So do oil companies, whose products are a major cause of climate change.
In parts of the world where there is no oil to sell, these are not particularly controversial. For most governments around the world, the past decade, and especially the past month, has driven home a simple message: dependence on other people’s oil is not just an economic and climate risk, but a threat to national security.
Take Ukraine, which responded to Russian attacks on fossil fuel power plants by ramping up wind energy. Looking at Pakistan, it is responding to the 2022 energy crisis with a five-fold increase in solar power generation, which is expected to save more than $6 billion (U.S.) in fossil fuel imports this year. Take the UK’s response to the Iran war by making solar panels and heat pumps mandatory for all new homes in the UK from 2028. Or better yet, ask China, which exports 60 percent of the world’s wind turbines and 80 percent of all solar panels, happily (and profitably) picking up energy transition leadership from the hole America threw it into.
This is the reality that President Donald Trump was ignoring when he told world leaders to “get our own oil” a month after the start of the Iran war. This is 2026. Oil and gas are no longer the only options. Currently, renewable energy generates almost half of the world’s electricity, and this proportion is increasing every year. The world still needs fossil fuels and will continue to do so for some time, but events like the Iran war will only accelerate the energy transition. That’s the lesson Canada must learn from this oil crisis, no matter how long it lasts or how soon it goes away.
Expensive oils are best for oil patches. This is fine for governments (especially Alberta) in the short term. That’s terrible for all Canadians. With this in mind, let’s consider where we should focus our nation-building energy.
Arno Kopecky is a contributor to The Walrus.
