U.S. pipeline problems expose Canada's vulnerability to having the taps turned off

Problems with two major oil and gasoline pipelines in the United States underscore how fragile the North American energy infrastructure grid is and how vulnerable Canadians are to having their supplies disrupted.

The 8,880-kilometre-long Colonial Pipeline taking gasoline from refineries in the Gulf of Mexico up the Eastern Seaboard was hit by a cyberattack this week, taking tens of millions of litres of gasoline offline. That's led to gas stations from mid-Atlantic states to as far north as New York running out, and long lines at stations that still have gas.

Under normal circumstances, the pipeline carries 2.5 million barrels of gasoline a day to the area up to Greensboro, N.C., with nearly a million more barrels winding up as far north as New Jersey.

The company says it expects to have everything back up and running by Friday. If that timeline holds true, it means something in the range of 20 to 30 million barrels of gasoline have been made unavailable.

The impact that local pipeline issues can have on the broader grid speaks to how interconnected and tenuous the system is, said Warren Mabee, director of the Institute for Energy and Environmental Policy at Queen's University in Kingston, Ont.

"Pipelines have become very high-stakes games, even in places where previously they had kind of gone unnoticed," he said in an interview with CBC News.

Gasoline is already being pulled in to affected areas from others with an excess, mostly from other parts of the U.S. Tankers full of gasoline from Europe have been diverted. While it hasn't happened yet, it's not impossible to imagine Canadian gasoline being rerouted.

The shutdown comes as gasoline prices are normally ticking higher as summer approaches  — a trend that's even more prevalent this year because of the pandemic.

"Memorial Day is three weeks away, [gasoline] inventories have pulled back meaningfully from peak-pandemic levels, and there is an expectation that everyone and their brother will hit the roads this summer for … vacations," transportation analyst Jonathan Chappell with investment research firm Evercore ISI said in a note to clients.

"As such, there is an element of panic involved when there is no timetable for the return of the pipeline that supplies about 45 per cent of all gasoline and diesel fuel consumed on the East Coast."

Gas tracking website GasBuddy.com says the average price of gasoline in the United States has already hit $2.99 a gallon, a level it hasn't hit since 2014.

Patrick De Haan, an analyst with the price-tracking website, said the impact on Canada is negligible in the short term at least. "If it goes for a longer period than a week, there may be an ever so slight rise," he told CBC News in a direct message.

Canadian prices haven't moved much, so far. According to government data, The average retail price of gasoline across Canada on Tuesday was a little over $1.33 a litre, a slight decline from $1.35 before the cyberattack.

Vivek Gupta, a partner in BDO Canada's cybersecurity practice, says the situation underscores how important cybersecurity is to critical infrastructure like oil and gas pipelines. The longer it goes on, the more likely it is that Canadian consumers will feel it, he said.

"If they're not able to recover in a week, then there will be more impacts on Canada," he said in an interview with CBC News on Tuesday.

"Refineries are sitting on product and storage tanks are filling up, but the demand for gasoline is still the same, if not higher," he said.

Line 5

While the prospect of Canadian gasoline being siphoned off to be used in the U.S. is remote, a far greater concern for Canadian drivers is another pipeline deadlock elsewhere in the United States.

Michigan has given Enbridge an ultimatum to shut down its Line 5 pipeline between Ontario and the state by Wednesday. Gov. Gretchen Witmer has railed against the 68-year-old pipeline on environmental grounds, arguing that the portion that passes underneath the Straits of Mackinac between Lake Huron and Lake Michigan is a "ticking time bomb" in danger of breaching.

Calgary-based Enbridge has dismissed those concerns and says it will only shut the line down if it is forced to do so by a court order. It's hard to imagine that would happen. Canada's federal government in fact asked a court to do the opposite on Tuesday, petitioning a U.S. court to block the state from interfering in a matter than concerns Canada and the U.S. as a whole. But it is hard to downplay how major such a disruption would be.

Roughly half of the oil that comes into Ontario destined to be refined into gasoline passes through the pipeline, so the impact would be significant and almost immediate, according to Laura Lau, chief investment officer with the Brompton Group in Toronto who closely follows the energy market.

"A short-term solution would be to rail it in, but that's a lot of oil," she said of the pipeline that carries more than 500,000 barrels of oil every day. "You only realize how big it is when you lose it."

Mabee says that while reducing oil demand and pipeline capacity "might be a good long term goal in the short term, we do need to think about the impact on the economies on both sides of the border."

Gasoline prices and supply have already been thrown up in the air from the cyberattack "and taking more pipeline capacity offline is just going to exacerbate that," he said.

While she doubts it would happen, Lau says a Line 5 shutdown would lead to shortages in Canada and gas lineups as people stockpile out of panic. "A lot of refineries would shut down because there'd be nothing to refine."

"I think cooler heads will prevail … but I told my husband yesterday to get some gas, just in case."