Gas prices across Canada are expected to rise due to the wildfire in Fort McMurray, Alta., but when and by how much they will increase is still undetermined.
According to website Tomorrow’s Gas Price Today, prices for regular fuel varied Monday from a low of 88.9 cents per litre in Edmonton to a high of $1.19 in Vancouver. The average price in Calgary was 92.9 cents, while Toronto sat at $1.04 per litre.
With many oilsands companies forced to close last week in the wake of the fire, production is down more than a million barrels per day in Alberta.
“If we’re losing between a million to a million and a half [barrels of oil] a day, it would take about 10 days before we start to have problems that would materialize into a problem at the pumps,” he said.
The worst case scenario, according to McTeague, would not just be an increase in gas prices, but a movement towards rationing of gas.
“That’s way down the road and worst case scenario,” he assured. “I’m not into the business of trying to sensationalize or become alarmist and I don’t think we’re there yet.”
The cost of a barrel of oil was up to just over CDN$57 Monday, which McTeague pointed out is about the same it was trading at a week ago.
“We have to get a better and clear understanding of the level of production and how long it will be disrupted before it will have any meaningful impact on driving prices up,” he said.
WATCH BELOW: The wildfire in Fort McMurray continues to grow, but is now threatening to stretch across the Saskatchewan border. Shaye Ganam reports.
In its latest report in February, the National Energy Board said there had been an average of 2.5 million barrels per day produced from the oilsands so far in 2016.
Shell Canada closed its Albian mine operations north of Fort McMurray on May 3, taking about 250,000 bpd out of production.
Michael Dunn, an oilsands analyst for Calgary investment firm FirstEnergy Capital, said Shell’s refinery near Edmonton is specifically designed to use feedstock from its mine but that supply has been cut off by a pipeline outage.
He said if Shell’s refinery runs out of stored bitumen and is forced to close, it will result in a much tighter gasoline supply in Western Canada. Higher prices for oilsands crude will squeeze profit margins at rival refineries and cause them to raise prices for consumers.
Overnight Wednesday, Suncor Energy shut down its upgrader just north of Fort McMurray, taking about 300,000 bpd of synthetic crude out of the market, and ConocoPhillips Canada closed its Surmont operations, which had been producing about 53,000 bpd.
On a conference call May 5, president Steve Laut of Canadian Natural Resources Ltd. said he believes the industry will recover quickly.
“It’s a very resilient and I would say innovative service and supply industry here in Alberta and in Fort McMurray,” he said. “I expect we will recover fairly quickly but it’s too early to say how much damage has actually been done to equipment and operations in the town of Fort McMurray.”
WATCH BELOW: Aerial video of Fort McMurray shows devastation
He warned that if the wildfire cuts off the supply of external power to Canadian Natural’s Horizon oilsands mine and upgrader, output would be choked back to 70,000 bpd from about 130,000 bpd. Electricity generated on site would allow the facility to continue to produce on a limited basis.
Horizon, which is 70 kilometres north of Fort McMurray, has had only minor setbacks related to the fire, mainly from pipeline outages.
U.S. also affected
Canada is the leading exporter of crude oil and natural gas to the United States, according to figures from the Energy Information Administration. Canada sends about 100 million barrels of crude and 240 billion cubic feet of natural gas per month to the U.S.
“It definitely is helping to boost the prices, although (the increase) is not that high considering the amount of crude that is being threatened,” said Jeff Mower of S&P Global Platts, which tracks the energy industry. He attributed the restrained market reaction to high inventories of crude in the U.S., especially in the Midwest, where much of the Canadian crude goes for refining.
Some grades of Canadian crude normally trade at premiums to benchmark U.S. oil while others usually trade at a discount, but all were trading higher Thursday and Friday than earlier in the week, according to Platts.
Key pipelines were closed Thursday, although a major one reopened Friday morning, according to analysts for Genscape, which monitors the pipelines.
Much of the oil from the oilsands is refined in the United States. The impact on the U.S. oil market will depend on how long the interruption lasts.
If facilities are not damaged, “then the production cuts are only as long-lasting as the fires,” said Dylan White, an oil storage analyst with Genscape. “Once the fires are subdued workers can come back to the production sites.”
Ritterbusch and Associates, which advises oil traders, said that such a short-term outage shouldn’t have much effect on oil prices because of a huge surplus of U.S. crude supplies.
-with files from The Associated Press and Dan Healing at The Canadian Press