Strait of Hormuz Blockade Threatens Bank of Canada's Interest Rate Path

Canadian consumers are paying more at the pump and the checkout counter. Higher fuel prices increase the cost to produce and transport goods, which are then passed to the consumer through higher retail prices for groceries and other goods. This inflation is driven by supply disruptions hitting Canadian refineries. Canada imports 500,000 barrels of crude oil per day, and 24% of those imports come from overseas. These disruptions stem from increasing global oil prices caused by Iran blocking free passage of oil resources in the Strait of Hormuz. The Strait carries roughly 25% of the world's crude oil supply and 20% of the world's liquefied natural gas. The resulting pressure on the Bank of Canada's 2.25% inflation target may complicate plans to lower interest rates.