Canada’s healthcare system must prepare for oil shocks and shortages

In the current maelstrom of global events, few policymakers or politicians have recognized the serious threat that high oil prices pose to Canada’s healthcare system. 

In early March Canadian commodities expert Rory Johnston warned that we are facing the largest oil shock in history, and if the Strait of Hormuz remains closed until June, could be facing oil at 200 dollars a barrel.

This has been received as a positive for Canada’s oil sector, which will see an historic windfall. but there has been little recognition of the massive un-budgeted costs this will impose. 

Health systems will be affected in several key ways.

Firstly, via the energy costs to run our facilities. 200 dollars per barrel would increase costs for provinces by three to five billion dollars. If that happens, provinces will have no choice but to cut services, which will result in preventable disability and deaths — unless the federal government steps up with significant emergency transfer payments.

Second is the logistics cost of patient transport and medical supply chains. The costs of travel for doctors and nurses will soar, Medevac costs could double, and some will require federal subsidy, rural and northern healthcare access will be brutally compromised.

The petrochemical inputs embedded in virtually every pharmaceutical and medical consumable mean that everything from gowns, gloves, IV bags and tubing to essential drugs could all be affected. Canada's pharmaceutical supply chain is the healthcare system's most acute and least understood oil shock vulnerability. 

Approximately 95 per cent of all medications are synthesized from petrochemicals — the base chemicals are petroleum derivatives. More than 80 per cent of active pharmaceutical ingredients are manufactured in China and India, both of which are significant oil importers exposed to the same incoming war shocks. Generic drug prices could increase by 30 to 50 per cent.

Canada — where insulin was discovered — has no domestic manufacturing capacity. Insulin is the most critical possible shortage, but others include common blood pressure medications, cancer drugs, and antibiotics. 

Roughly 70 per cent of all medical consumables (gloves, syringes, IV tubing, drapes, gowns, wound dressings, catheters, blood collection devices) are manufactured from petrochemical-derived plastics and polymers. 

Critically, the supply chain's transport infrastructure depends on diesel trucks that keeps biologics, vaccines, and blood products viable as they make their way across the planet. 

And finally, the health consequences of economic crises (such as the kind created by historic oil shocks) are self-amplifying. When people cannot afford healthy food or medication, they become much more likely to need acute healthcare. 

There are a number of measures that governments and health systems should take now to adapt.

A national medical supply strategic reserve:  
A 90-day national reserve of essential consumables — modeled on national petroleum reserve frameworks — held at regionally distributed warehouses. 

Domestic consumable manufacturing investment:  
Canada has no significant domestic glove, gown, or IV bag manufacturing. Federal investment in domestic capacity — through production incentives or crown investment — would reduce import dependency.

National group-purchasing organisation at emergency scale:  
All provinces should pool consumable procurement through a single federal emergency purchasing entity during a declared supply shock. 

There are low-cost efficiency measures that could be implemented immediately. The Federal Government should establish: 

• A federal fund of 500 to 750 million dollars directed specifically towards heat pump conversion for facilities.
• A federal emergency operating subsidy specifically for rural hospitals serving populations of under 10,000, as well as enhanced travel subsidies.
• Redundancy in the cold chain, with multiple regional storage sites.

Canada's healthcare system will absorb between one and 12 billion dollars in additional annual costs depending on which oil price scenario materializes. 

A portion of these costs are unavoidable. The impending logistics nightmares can't be wished away. But a substantial portion is preventable through actions that are available now, at costs that are significant but ultimately fractional compared to what they will prevent. 

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. 

All of the proposed investments will strengthen Canada’s health care system, ensure care in a crisis, and lay a foundation for greater resilience. The alternative is avoidable, if we act now. 
 

Dougald Lamont is a writer and public policy researcher in Winnipeg, Manitoba. He was MLA for St. Boniface and the Leader of the Manitoba Liberal Party, and was dubbed “the Nostradamus of the Legislature” for predicting Manitoba’s second wave of COVID.