Canada must prepare for oil shocks and shortages

High oil prices threaten Canada’s healthcare system, potentially imposing massive un-budgeted costs on provinces and causing severe shortages of essential medical supplies.

Soaring operational expenses

Policymakers have largely overlooked the impact of high oil prices on the nation’s health infrastructure. Early March warnings from commodities expert Rory Johnston suggest the country might face the largest oil shock in history, with prices potentially reaching $200 per barrel if the Strait of Hormuz remains closed through June.

This scenario presents a windfall for the oil sector but creates massive financial strain for provinces. Energy costs to run facilities alone could increase provincial expenses by three to five billion dollars. If provinces are forced to cut services to manage these costs, preventable disability and deaths are likely to follow.

The source text notes that unless the federal government provides significant emergency transfer payments, provinces will have no choice but to reduce care. This creates a difficult situation where economic shocks directly translate into fewer available services for patients.

Supply chain vulnerabilities

Logistics present another major hurdle. Travel costs for medical staff and medevac expenses could double, severely compromising rural and northern healthcare access. The transport infrastructure relies on diesel trucks to keep biologics, vaccines, and blood products viable, making the entire supply chain vulnerable to fuel price spikes.

The pharmaceutical supply chain represents the healthcare system’s most acute vulnerability. Approximately 95 percent of all medications are synthesized from petrochemicals, with more than 80 percent of active pharmaceutical ingredients manufactured in China and India. These nations are significant oil importers exposed to the same global instability.

Generic drug prices could increase by 30 to 50 percent. Canada, where insulin was discovered, has no domestic manufacturing capacity. The most critical shortage would likely be insulin, followed by common blood pressure medications, cancer drugs, and antibiotics.

Roughly 70 percent of medical consumables—ranging from gloves and syringes to IV tubing and wound dressings—are manufactured from petrochemical-derived plastics and polymers. The cold chain depends on transport infrastructure that cannot function without affordable fuel, creating a fragile link between manufacturing hubs and Canadian hospitals.

Strategic preparation measures

Governments and health systems should adopt several measures to adapt to these risks. A national medical supply strategic reserve of essential consumables, modeled on national petroleum reserves, should be established at regionally distributed warehouses. This 90-day stockpile would provide a buffer against global disruptions.

Domestic consumable manufacturing capacity must be built. Canada currently has no significant domestic production for gloves, gowns, or IV bags. Federal investment through production incentives or crown investment would reduce import dependency and insulate the system from international shocks.

Provinces should also pool consumable procurement through a single federal emergency purchasing entity during a declared supply shock. This national group-purchasing organisation would leverage the collective buying power of the entire country during crises.

The Federal Government should establish a fund of $500 to $750 million directed specifically toward heat pump conversion for facilities. A federal emergency operating subsidy should also be created for rural hospitals serving populations under 10,000, along with enhanced travel subsidies.

Implementing redundancy in the cold chain with multiple regional storage sites would further stabilize the supply of temperature-sensitive goods. Canada’s healthcare system will absorb between one and 12 billion dollars in additional annual costs depending on the oil price scenario.