Will Oil Spoil the Resiliency of Canadian Consumers?

Highlights

• The conflict with Iran has sent global oil prices soaring, pushing up fuel and fertilizer costs. Transportation bottlenecks have resurfaced, raising concerns that supply chain pressures could once again drive up the cost of everything.
• This energy price shock risks weighing on Canadian consumers, who remained resilient throughout the trade war with the US. The lowest-income households, already under significant financial strain, are the least able to handle a reacceleration in inflation. However, they are also less exposed to higher transportation costs in the near term than more affluent households. Moreover, the increase in the GST/HST credit—the Canada Groceries and Essentials Benefit, planned before the Iran conflict—should more than offset the consumption impact of higher energy costs in the middle part of 2026.
• Tax cuts, price controls and increased income transfers to the most financially vulnerable households are levers all levels of government could pull to provide additional relief to Canadians. But they all come at a cost, and some more than others. Policy options for offsetting the inflationary impact of higher energy prices will need to balance providing broad support with assisting the Canadians in greatest need, all while keeping an eye to fiscal sustainability.