Iran War, Soaring Prices Drive Record Oil Profits

U.S. President Donald Trump’s misguided war against Iran has caused another shock in global oil prices – the 14^th such shock in the last half-century. World oil prices rose 50% or more after the war started, and have stayed high despite Trump’s repeated promises to stop the war and reopen the Strait of Hormuz. These price increases are is driving massive increases in profits for petroleum companies around the world – including Canada.

Canada produces three times more oil than it consumes. And while Canada imports small amounts of oil to the eastern provinces, almost none of that is sourced from the Persian Gulf. Hence there is no significant impact of the war on our domestic supply volumes or costs.

Nevertheless, because of a policy choice to tie domestic oil and petroleum product prices to global benchmarks (allowing oil producers to charge Canadians world prices for their own oil, on pain of diverting supply to more lucrative foreign markets), Canadian petroleum prices have soared in tandem.

The combination of sky-high prices with stable production costs is producing a profit windfall for Canadian petroleum companies. This is confirmed by the recent release of financial reports by publicly-traded Canadian oil companies for the second quarter of 2026.

The table below summarizes after-tax earnings and other metrics for the four largest publicly-traded Canadian producers. Their combined revenues (net of royalty payments) grew almost 50% in the April-June period, compared to the year-earlier period, thanks to the effect of Trump’s war on world prices.

After-tax profits rose more dramatically, since production costs remained largely unchanged. After-tax profits at the big four more than doubled: rising 144% compared to the second quarter of 2025, reaching a combined total of $13.3 billion. That’s almost $150 million per day in after-tax profit over the three-month period.

These four companies represent only a portion of the Canadian petroleum sector. Financial results for many companies (including wholly-owned subsidiaries of foreign oil companies) are never publicly reported. However, Statistics Canada publishes helpful financial data on an industry-wide basis. That data for the second quarter of 2026 will be released later in August.

Extrapolated to apply to the broad Canadian petroleum sector (upstream and downstream), the big four’s results suggest that second-quarter industry-wide profits could reach $30 billion (up from $12.6 billion in the second quarter of 2025). Canadian oil profits for the full year could reach $100 billion. That would set a new all-time record, smashing the peak $68 billion after-tax profit the industry recorded in 2022 (when oil prices were similarly shocked following the Russian invasion of Ukraine).

What are the oil companies doing with this record profit flow? There is no robust pattern of reinvestment in new Canadian projects. In fact, excluding acquisitions of other companies and properties (which does not represent an increase in real investment), capital spending by the big four companies actually declined slightly in the second quarter (compared to the year earlier period).

Instead, their main priority is to pay out so-called “excess cash” to company owners, in the form of increased dividend payments and share buy-back programs. Companies buy back their shares as a way of boosting share prices (this benefits company executives, too, through share-based compensation systems). The four majors spent over $6 billion on share purchases and dividend payments in the second quarter, up by almost $2 billion from like period 2026.

Hopes that booming oil profits will lead to new investment and jobs in the petroleum sector are being dashed by the priority these firms are placing on cash payouts, rather than reinvestments.

But the combination of record profits and rapid share buybacks has been great for company owners. Share prices at the big four majors have increased by an average of 45% since the start of the year. Most of those gains are captured by the wealthiest minority of the population. Other Canadians experience only higher costs and declining real incomes.

Research on the distribution of global oil profits during the 2022 price spike confirms that each oil shock further redistributes income upward. Global oil profits almost doubled that year, to nearly $1 trillion (U.S.). In the U.S., 50% of those gains were received by the richest 1% of the population; the bottom 50% of the population got almost none. A less extreme, but similar, pattern prevails in Canada.

In the meantime, oil-fueled inflation remains a threat to living standards and economic performance for most Canadians – those who do not own significant equity holdings in oil companies. Inflation has increased again in Canada since the Iran war started (just as it did in 2022 after the oil shock accompanying the invasion of Ukraine).

Spillover price increases for other goods and services (whose costs of production also increase due to high petroleum prices) will amplify inflationary pressures. And if the Bank of Canada responds with higher interest rates (as it will if above-target inflation persists), Canadians will be punished further with higher interest costs, on top of sky-high gasoline prices and faster broader inflation.

The current oil price shock, just the latest in an ongoing pattern of global price volatility, confirms that fossil fuel prices are the greatest threat to affordability and living standards for Canadian workers and consumers. Please follow the Centre for Future Work’s False Profits project for more details on the impact of oil prices on prices, real wages, and inequality in Canada.

Jim Stanford