Fuel prices may spike because of Fort McMurray wildfire

Extended: Look at damage in Fort McMurray New footage from inside Fort McMurray, shot on Sunday, May 8, 2016.

While the bulk of the blaze has moved out of the area, experts say that the forced shutdown of many oil operations in Fort McMurray will impact fuel prices across Canada.

The fires never reached Suncor’s or Syncrude’s sites near Fort McMurray, but the companies shut down the operations and evacuated camps, sending hundreds of workers out of the area.

The shutdown, experts say, will force fuel prices to go up because supplies will eventually begin to dwindle.

As a result of the shutdown, production is down by more than a million barrels per day, half of the province's daily production or one third of Canada’s.

On Monday, the price started the day at $45.60 per barrel, but the shutdown could drive that way up. Price at the pump is also expected to spike in as little as a week.

But the short term impact may not be the main concern, some say.

“That is not a concern for the short term – five or six days – but at a million to a million and a half barrels per day, when you have a maybe 26 or 30 million barrel reserve, a cushion, if those go on a week or so, you may very well find those companies aren’t going to be able to produce gasoline or other petroleum products,” says Dan McTeague with Gasbuddy.com.

In Calgary, the current average price per litre of regular gas is 92.7 cents, while the cheapest rate at some stations is 84.9 cents.

Economists say the impact could reach into other parts of Canada's economy as well. They say it is too early to work out a dollar figure on the disaster, but it's unlikely that it will turn out to be a short-lived problem.

It will likely be weeks or even months before the facilities can start up again.

It's not just the oil and gas industry that could be suffering, as some businesses were damaged or destroyed and it will take time before they're back in operation.

Todd Hirsch, chief economist with ATB Financial, says that the economy will take a hit merely from the fact that all the undamaged businesses have been forced to close while the community has been evacuated.

He says that it will affect Canada as well. "I do expect that when we see the numbers for the national GDP that it will register as a downturn in GDP. Just like we saw in June of 2013, the flood in southern Alberta did have an economic impact when you had all those businesses in Calgary and High River. This issue in Fort McMurray, while it is not as big as Calgary, my guess is businesses and oilsands production is going to be off for a longer period of time. I do feel in the second quarter that this will be felt in the national economy."

He says that the disaster will underscore the importance of oilsands to Canada's economy and show that it is a national industry and not just an Alberta one.

The wildfire will also affect the employment rate, but only within the province, Hirsch said. "90,000 people, all those people can't be working at the moment and the businesses that they work for could be out of business indefinitely."

He says the provincial unemployment rate could reach above eight percent, hitting the province at a time when it is already suffering because of low oil prices. However, the labour needed to rebuild Fort McMurray could offset some of that impact, Hirsch added.

The oilsands operations were not damaged in the fire and they are not at risk at this point because the wildfire is heading east towards Saskatchewan.