Toronto will see a bump in gas prices from a shortage of oil due to the blockage of the Suez Canal, according to an expert.
Dan McTeague, former MP and president of Canadians for Affordable Energy, tweeted on Wednesday that gas prices are set to rise to by at least four cents per litre as of Friday and may go higher into the weekend.
McTeague who’s been predicting oil prices since 1994, told the Star on Thursday, that prices will likely rise due to a shortage of oil supplies meant to be shipped to Canada, caused by the interruption to shipping through the canal.
Over 10 per cent of global trade, including seven per cent of the world’s oil, passes through the canal.
“Demand for oil and fuel products has been rising globally, so this has traders [in the market] nervous, thinking about 10 per cent to 20 per cent of this supply being cut off for an extended period of time,” McTeague said.
“If you have a disruption at a time in which demand was, for some time, moving up, then it causes markets to react rather dramatically,” he added.
A skyscraper-sized cargo ship called Ever Given ran aground in the Suez Canal in Egypt Tuesday morning while attempting to pass through from the Red Sea. Since then, more than 150 vessels meant to travel through the canal are idled in it waiting for the ship to be freed.
The Suez Canal opened in 1869 and is a crucial link for oil, natural gas and cargo. In 2015, Egyptian president Abdel-Fattah el-Sissi completed a major expansion of the canal to accomodate larger ships.
It’s the world’s biggest trading route.
McTeague said that the price of oil barrels has increased from $57.76 per barrel on Wednesday, to $61.18 on Thursday, which has a direct increase on the pumps.
“Due to the temporary disruption in supply, Toronto could see gas prices move from Thursday’s price at $118.9 to Friday’s price being $122.9 and on Saturday dropping down to $120.9 per litre of gas,” predicts McTeague, who has built a reputation on forecasting prices at the pump.
A Statistics Canada report on monthly gasoline prices by region shows a growing trend in Toronto since December. The price there was at $110.9 cents per litre in January and increased to $118.1 cents per litre in February.
Because of the pivotal role that oil and fuel play in the economy, the increase in prices could be passed on to our food supply chains and other costs of living, McTeague said.
“From harrowing to seeding, to the transportation of goods via truck and rail, to the grocery checkout, this could mean higher prices for just about everything, most notably food,” he said.
As for the fate of the stuck ship, dredgers, tugboats from a boat-salvaging team flew from the Netherlands to try to dislodge it on Thursday.
The massive weight of the ship, 22,000 tonnes, may make it impossible to extract it easily.
The team involved says it may have to remove some of the ship’s containers and drain the vessel of the water serving as ballast before dredging the area again and then trying once more to nudge the ship using tugboats.
The team said this could take days or weeks.
“Blocking something like the Suez Canal really sets in motion a number of dominos toppling each other over,” said Lars Jensen, chief executive of Denmark-based SeaIntelligence Consulting. “The effect is not only going to be the simple, immediate one with cargo being delayed over the next few weeks, but will actually have repercussions several months down the line for the supply chain.”