Oil shocks threaten Canada's healthcare system

Canada’s healthcare system faces a significant threat from high oil prices, which could lead to oil shocks and shortages. According to Canadian commodities expert Rory Johnston, the largest oil shock in history may be imminent, with oil potentially reaching $200 per barrel if the Strait of Hormuz remains closed until June.

This scenario would have a profound impact on Canada’s healthcare system, affecting it in several key ways. Firstly, energy costs to run facilities would increase, with provinces facing additional costs of $3-5 billion per year.

These increased costs would likely lead to service cuts, resulting in preventable disability and deaths, unless the federal government provides significant emergency transfer payments. Additionally, logistics costs for patient transport and medical supply chains would soar.

Impact on Pharmaceutical Supply Chain

The petrochemical inputs embedded in pharmaceuticals and medical consumables mean that everything from gowns and gloves to essential drugs could be affected. Approximately 95% of all medications are synthesized from petrochemicals, with over 80% of active pharmaceutical ingredients manufactured in China and India, both significant oil importers.

Canada’s lack of domestic manufacturing capacity leaves it vulnerable to shortages. Insulin, discovered in Canada, is a critical shortage risk, along with common blood pressure medications, cancer drugs, and antibiotics.

Medical Consumables and Supply Chain

Roughly 70% of medical consumables, such as gloves and syringes, are manufactured from petrochemical-derived plastics and polymers. The supply chain’s transport infrastructure relies on diesel trucks to keep biologics, vaccines, and blood products viable during transport.

The health consequences of economic crises, such as those created by historic oil shocks, are self-amplifying. When people cannot afford healthy food or medication, they become more likely to need acute healthcare.

Adaptation Measures

There are several measures that governments and health systems can take to adapt to these challenges. A national medical supply strategic reserve, with a 90-day reserve of essential consumables, could be established. Domestic consumable manufacturing investment, through production incentives or crown investment, could reduce import dependency.

A national group-purchasing organization at emergency scale could also be implemented, with all provinces pooling consumable procurement through a single federal emergency purchasing entity during a declared supply shock.

Low-cost efficiency measures, such as heat pump conversion for facilities and enhanced travel subsidies, could be implemented immediately. A federal fund of $500-750 million could be directed towards these initiatives.

Canada’s healthcare system will absorb between $1-12 billion in additional annual costs, depending on the oil price scenario. While some costs are unavoidable, a substantial portion can be prevented through actions available now, at significant but ultimately fractional costs compared to the consequences of inaction.

The 180-day drug stockpile which costs a billion today costs nothing compared to the consequences of a global insulin shortage for nearly four million Canadians with diabetes. The rural hospital emergency fund that costs 500 million dollars annually prevents the loss of healthcare access for millions of rural Canadians who have no alternative.