TORONTO -- The shutdown of the Colonial Pipeline is causing serious disruptions in the eastern United States. As a result, experts say motorists in some parts of Canada could be paying more at the pump.
"People may think it's just a U.S. problem because of supply of gasoline and whatnot but what they don't understand is that gasoline prices in Canada are made in the USA," said Roger McKnight, chief petroleum analyst for En-Pro International, in a phone interview with CTVNews.ca.
The Colonial Pipeline has been shut down since last Thursday after being targeted by a ransomware cyberattack. This has led to widespread panic-buying at the pumps, which has contributed to thousands of gas stations across the eastern United States running out of fuel. Gas prices in the U.S. also surpassed US$3 per gallon nationally for the first time since 2016.
Opher Baron, a professor of operations management at the University of Toronto's Rotman School of Business, likens the price relationship between the U.S. and Canada to two gas stations at the same intersection.
"The minute one of them raises the price and the other ones immediately raise the price as well. And the minute one of them reduces the price, the other one takes a bit of time until they reduce their price as well," Baron told CTVNews.ca in a video call.
McKnight says gasoline prices in Eastern Canada are closely tied to wholesale prices set in the U.S. as well as the New York Harbor oil prices
"Southern Ontario basically follows the wholesale price movements on a daily basis of Buffalo, New York and Rochester, (N.Y.). Montreal follows Albany, New York, and Northern Ontario follows Detroit so anything that disrupts supply to the eastern part of the U.S., especially when it comes to New York," said McKnight.
"It'll affect the prices here in Canada, even though there may not be a shortage of gasoline in Canada, it doesn't matter."
Gas prices in Eastern Canada have already started to creep up. , average gas prices on Wednesday were up 1.7 cents Ontario and two cents Quebec from last week. Nova Scotia and New Brunswick saw an increase of 3.8 cents and 2.5 cents, respectively, while gas prices in Prince Edward Island jumped 2.6 cents. Newfoundland and Labrador saw the biggest increase in the country, with prices jumping 4.3 cents in the last week. The average price across Canada was 129.0 cents per litre, up from 128.3 cents last week.
The Prairies and B.C. saw little to no change in prices from last week. McKnight doesn't expect gas prices in these provinces to be affected by the Colonial Pipeline disruption.
"Basically, the prices west of Thunder Bay really don't follow anything that happens in what we call the New York Harbor," McKnight said.
Even if the Colonial Pipeline overcomes the cyberattack and starts to come back online, which the company promised to do by the end of the week, McKnight doesn't expect the disruptions to immediately end.
"It won't start up overnight. It'll take about a week or 10 days to get this thing going. So, it's going to be very, very interesting for states along the eastern seaboard and Southern Ontario, Quebec, and the Maritimes," McKnight said.
