The Roller-Coaster Price of Oil Is Bad for Almost Everyone

Over the past month, the price of oil has been bouncing around like a lie detector machine. The joint United States–Israel attack on Iran that began in February triggered the biggest one-month price gain in oil’s history. The price of Brent crude has surged and plummeted with every twist in the war.

• The Iran war has recently increased the volatility of crude oil prices globally
• Global financial institutions have consistently identified oil spikes as a major driver of inflation
• Risk of dependence on other nations’ oil has caused some countries to expand renewable energy use

Just like in 2022, when Russian president Vladimir Putin invaded Ukraine and cut Europe off from Russian oil and gas, sending oil soaring, the Iran war has yielded two wildly opposing conclusions about humanity’s relationship to oil. The first: Hooray, the price of oil is up—let’s cash in by producing more! And the second: Oh no, the price of oil is up—time to speed up the energy transition!

Both statements have merit if you’re an oil-bearing nation. There is indeed a lot of money to be made at prices like these. And everything’s about to get more expensive. Again.

This simple trade-off—high oil prices generate both wealth and inflation—is so obvious you’d think it could go without saying. You’d be wrong. Instead of highlighting the connection, journalists and politicians have tended to treat the two sides of the ledger as if they occupy separate realities.

This two-brain thinking primarily afflicts the citizens of oil-producing nations, where certain vested interests have a long history of obscuring certain facts. Take Canada, for example. Last time oil prices exploded, in 2022, so did inflation—not just here but all over the world. The COVID-19 pandemic was a major factor too—but so, undeniably, was the sudden leap in energy costs. Did Canada’s public discourse emphasize the transparent link between oil companies’ record profits and the high cost of living? No, we blamed the carbon tax—the price on greenhouse gas emissions launched federally in 2019. Then, in April 2025, we killed the carbon tax. Nothing changed. Oil prices and inflation had already dropped by then; even gasoline prices, which dipped temporarily, are higher today than they were before Prime Minister Mark Carney ended the consumer price on carbon.

A more holistic view of high oil prices illuminates the real question: Is the windfall worth the pain?

In Canada, the world’s fourth biggest producer of oil, fossil fuel royalties usually contribute around $12 billion per year to all levels of government. In 2022, the most profitable year in the industry’s history, that figure leapt to almost $34 billion. Most of that went to Alberta—oil and gas accounted for a third of the province’s revenue that year.

Meanwhile, the federal government earned almost $10 billion from oil and gas in 2022. Ottawa’s total revenues in 2022 were $448 billion. This means that, in the oil industry’s best year ever, fossil fuel 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 Centre for Future Work, has calculated that the high price of oil cost Canadian consumers a collective $200 billion between 2022 and 2024—or $12,000 per household. That wasn’t just in gasoline and home heating; expensive oil and gas drove up virtually every item on the consumer price index, including interest rates.

One can quibble with Stanford’s specific numbers, but no serious financial analyst questions the huge role energy prices play in the global economy. Trevor Tombe, another prominent economist at the University of Calgary, has calculated that oil prices accounted for roughly a third of Canada’s record inflation in 2022. Tiff Macklem, governor of the Bank of Canada, has consistently identified oil spikes as a prime driver of inflation, as have the heads of virtually every major financial institution on earth.

One thing they rarely mention, though, is climate change. Extreme weather events have been hammering global harvests over the past decade, driving up the price of food everywhere. This was another major factor in the record inflation of 2022: a prolonged drought across California and Arizona that summer drove American vegetable prices up 80 percent, while a similar drought in Europe spiked the price of olive oil by 50 percent. The summer before, drought in Western Canada cut the wheat harvest by more than a third. These impacts are cascading across the planet, obliterating everything from Korean cabbage to Indian rice to West African cocoa.

In other words, grocery stores aren’t the only ones gouging food prices. Oil companies—whose product is the primary driver of climate change—are too.

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None of this is particularly controversial in those parts of the world that don’t have oil to sell. For that vast majority of the world’s governments, the past decade—and especially the past month—has driven home a simple message: dependence on other people’s oil isn’t just an economic or climate risk, it’s a threat to national security.

Look at Ukraine, which responded to Russian attacks on fossil fuel power plants by building out wind energy. Look at Pakistan, which responded to the energy crisis of 2022 with a fivefold expansion of its solar power that’s expected to save the country over $6 billion (US) in fossil fuel imports this year. Look at the United Kingdom, which has responded to the Iran war by mandating solar panels and heat pumps for all new homes in England starting 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 lucratively) picking up the energy-transition leadership mantle from the ditch the US threw it into.

That’s the reality President Donald Trump was ignoring when he told world leaders, a month into the Iran war, to “go get your own oil.” This is 2026. Oil and gas aren’t the only option anymore. Renewables now generate almost half the world’s electricity, a share that’s growing every year. The world still needs fossil fuel and will for some time, but events like the Iran war can only accelerate the energy transition. That’s the lesson Canada should be taking away from this latest oil shock, no matter how long it lasts or quickly it fades.

Expensive oil is great for the oil patch. It’s okay for governments (especially Alberta) in the short term. It’s terrible for Canadians at large. Let’s keep that in mind as we ponder where to put our nation-building energy.