Iran War Drives Heating Oil Prices Up 42% Across Canada, Prompting Government Relief Measures
Heating oil prices in most of Canada have surged 42 per cent since the start of the Iran war, reaching nearly $2.50 per litre. Disruptions in the Strait of Hormuz and routine refinery shutdowns are driving costs higher, prompting emergency reserve loans from the U.S. and new heat pump rebates from the Canadian government.
Heating oil prices across most of Canada have jumped 42 per cent since the start of the war in Iran, pushing the average retail price for furnace oil to just under $2.50 per litre on Tuesday, up from $1.76 before the conflict began. The surge has also sent diesel fuel prices to record highs above US$6.50 per gallon following widespread disruptions in the Middle East.
Behrouz Bakhtiari, a supply chain expert at McMaster University, stated there is "no question" that the higher prices are linked to the war, specifically citing issues in the Strait of Hormuz. Routine fall refinery shutdowns are adding further pressure to prices this year due to existing market shortages.
In response to surging costs, the Trump administration offered to loan up to nearly one-third of the one-million-barrel U.S. emergency heating oil reserve. U.S. Energy Secretary Chris Wright said the administration is committed to lowering energy costs through competitive bidding for fuel loans. The U.S. Northeast Home Heating Oil Reserve is held at sites in New Jersey, Connecticut, Massachusetts, and Maine. About one-third of New England homes use heating oil, including roughly half of all homes in Maine.
The financial strain is particularly acute in Atlantic Canada, where 305,900 homes used oil for heating as of 2022. Prime Minister Mark Carney announced a new heat pump rebate program launching early next year, alongside $2 billion in spending to retrofit one million homes. Carney stated that retrofitting homes with heat pumps would mean $1,400 in annual savings on energy bills for households currently heating with oil, propane, and electric resistance.
Finance Minister Francois-Phillipe Champagne announced that the pause on the federal excise tax on fuel would be extended until February. However, experts warn that once the tax holiday ends, a single cold snap could result in an additional $600 to $700 per household cost for Atlantic Canadians. Combined with persistently high heating oil prices, total energy bills could rise by $3,000 to $4,000 for affected households.