The Iran war is causing a global oil shock with energy prices skyrocketing across the world.
And in a bid to avoid running through supplies, governments around the world are instituting energy-saving measures, including asking employees to work from home or cut down on driving and other measures while the crisis continues.
In Thailand, an order for civil servants to work from home for the foreseeable future came with another request, as well – the Thai prime minister also ordered measures including suspending overseas trips and using stairs instead of elevators.
Southeast Asia’s second-largest economy has around 95 days of energy reserves left, officials have said, and it has been seeking additional sources of liquefied natural gas from the United States, Australia and South Africa.
Pakistan has mandated a four-day work week and work from home measures for a large swathe of its public service and ordered that all universities hold classes online, citing “resource conservation.”
Vietnam’s government has asked private firms to consider letting their employees work from home, while India has asked liquefied petroleum gas consumers to avoid panic buying.
Sri Lanka introduced fuel rationing on Sunday to extend the life of its supplies. Under the new system, motorcycles will be allocated five litres, cars 15 litres, and buses 60 litres of fuel per week.
The island nation has secured fuel shipments until the end of April, authorities at the state-run Ceylon Petroleum Corporation told reporters in Colombo, adding that police will be deployed to reduce lines and minimize hoarding.
“It’s supply and demand,” said Concordia University economist Moshe Lander.
“When supply of oil is being constrained and demand is not constrained with it, then the price is going to go sky high. And we’ve already seen that in Canada at the pumps,” he added.
While part of the effort to contain the price of oil involves raising supply, such as Canada and dozens of other countries agreeing to release 400 million barrels of oil from their strategic reserves, the other part of the puzzle is lowering consumption, Lander said.
The Iran oil shock has the potential to be a “pivot point,” Lander said, forcing economies around the world to rethink the way they do their business.
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“Usually economies go full steam ahead until some shock comes along, whether it’s from the supply side or the demand side, that causes this pivot moment,” he said, adding that the lockdowns forced by the COVID-19 pandemic were such a pivot point.
“The idea of working from home is a lot more acceptable now,” he said, explaining why this made it easy for governments around the world to pivot to work from home recommendations.
While most of the countries that have put in place such measures are heavily dependent on Middle Eastern oil, “Canada is not immune,” Lander said.
During the 1973 oil crisis, the U.S. and Canadian government put in place several measures to contain the price of oil, which rose by 400 per cent during the period of the crisis.
The U.S. imposed a national speed limit of 89 km/h (55 mph) on all highways in 1974, a limit that was not lifted until 1995.
In Canada, then-prime minister Pierre Elliot Trudeau set limits on the price that Canadians can be charged for oil at the pumps.
However, in the present day, it is unlikely that Canada will see any consumption controls, said Behrouz Bakhtiari, a professor at McMaster University’s DeGroote School of Business.
“I do not foresee any bigger mandates from the government towards consumers to lower their consumption,” he said.
“We’re not a country that does well with mandates. Mandates with respect to consumption, I don’t see it would fly at all,” Bakhtiari added.
For one, it would bring back the polarizing debates that came with the COVID-19 lockdowns, which the federal government might want to steer clear of, Lander said.
“A stay at home or work from home order isn’t necessarily going to be met with the greatest acceptance within (Canadian) society,” he said.
“I think that the easiest way to do it is to make a recommendation or at least indicate to firms, hey, it’s your decision and you guys decide what you want to do and work with your workers.”
However, it would take a lot for Canada to be in the same dire straits as some Asian economies, Bakhtiari said.
“For Canada to find itself in this position… before that, many other countries would have to be hit very, very, very hard,” he said.
Instead, Bakhtiari said the Canadian government might try to put in place some supply side measures by ensuring that oil is being pumped at capacity.
This could involve a number of measures from ensuring crucial energy lines, like Enbridge Line Nine from Ontario to Quebec, run at capacity to delaying maintenance on some lines to ensure they run full time, he said.
Another measure could include issuing an emergency rail priority order under Canada’s Railway Safety Act. This would essentially mean that oil transportation from Western Canada to the refineries in the East would take precedence over all other rail traffic, he said.
This would ensure the “refineries on the east side are able to produce, to process the oil coming from the west,” and get crucial energy to Ontario, Quebec and the Maritimes, he said.
This would mean the federal government would have to act like a “handshake” between Western and Eastern Canada.
A result of the 1970s oil crisis was the creation of Petro-Canada, a national oil company. Canada could use this as an opportunity to find buyers other than the U.S., which buys most of its energy, Bakhtiari said.
“Canada should use this opportunity, just like we used tariffs, as an opportunity to diversify supply,” he said.
The 1973 oil crisis prompted structural, long-term shifts in industry, Lander said, pointing to cars and electronics becoming more energy efficient. This current oil shock presents a similar opportunity, he said.
“Do we go back to the old halogen-style light bulbs? No. Once you go one direction, you usually don’t go back,” he said.
–with files from Reuters