When we speculated about what might bring the global oil market back into balance this year, at least temporarily, supply disruptions in the Middle East ranked high on our list.

And when economists pondered the risks to their forecasts that the Canadian economy would continue its modest expansion during the second quarter, they were probably worrying about the country’s rising exchange rate or how quickly the government’s stimulus would be allocated.

But in both cases, the most consequential factor turned out to be not man, but Mother Nature: Last week, a bush fire in Canada’s resource-rich province of Alberta soon turned into a conflagration.

Despite firefighters’ best efforts, including the rapid deployment of four air tankers, the bush fire quickly grew out of control and went from a several-acre footprint to consuming nearly 150 acres just two hours later. By Tuesday, the wildfire was threatening the oil boomtown of Fort McMurray in the heart of the oil-sands region.

Soon thereafter, the natural disaster, which could prove to be the costliest in Canada’s history, forced oil-sands producers to sideline their operations. That took as much as 1 million barrels per day of crude oil off the market, or about 40% of total oil-sands output, roughly halving the estimated daily gap between global supply and demand, not including the huge amount of oil that’s stockpiled in inventories worldwide.

News of the wildfire’s spread and the resulting curtailment of production helped give oil prices a temporary boost, just as crude’s rally was beginning to show signs of fatigue.

By Sunday, the inferno had engulfed 625 square miles and destroyed more than 1,600 buildings.

Thankfully, oil producers finally caught a break: A shift in the winds caused the fire to move away from Fort McMurray toward more sparsely populated areas, while the fire had not spread as much as had been feared. Nevertheless, the provincial government says the fire has been 0% contained and is still burning out of control.

As Ralph Goodale, federal minister of public safety and emergency preparedness, told CNN, “We may be turning a corner, but it’s too early to celebrate. This beast is an extraordinarily difficult problem.”

Indeed, officials warned that the blaze could continue burning for months, albeit in more forested areas.

A New Misery Index

As investors, we have the distasteful task of attempting to quantify a disaster’s effect, even as our fellow human beings are still suffering from its path of destruction and could continue to suffer from its toxic aftermath. About 90,000 people have been forced to flee their homes in Alberta, with some having to move twice, though so far only two deaths have been attributed to the fire.

The most headline-grabbing insurance estimate came courtesy of Bank of Montreal analysts, who put the total damage as high as C$9.4 billion, but only if nearly all homes, cars and businesses in Fort McMurray were destroyed. Fortunately, the regional municipality’s fire chief reported that even with the “ocean of fire,” 85% of the city is still intact.

That likely brings insurance losses closer to a range of C$2 billion to C$3 billion. But even with the lower price tag, it would still be Canada’s costliest natural disaster by a wide margin.

With idled production reportedly costing oil-sands producers an estimated C$70 million per day, the S&P/TSX Capped Energy Index is off about 7.0% from its close prior to the wildfire, while the overall Canadian market is down 2.8% over that same period.

Shut-in production could theoretically restart within about a week after the threat has passed, though there are logistical concerns, such as making sure crucial power and pipelines are still available, while moving evacuated staff back into position with sufficient food and lodging.

That could mean some producers could take several more weeks to commence operations again, even without damage, analysts with Morgan Stanley wrote in a note.

Suncor Inc. (TSX: SU, NYSE: SU), one of the biggest oil-sands producers and a member of our Dividend Champions Portfolio, declared force majeure, along with some of its peers that operate there. That helps protect the firm from any liabilities resulting from its inability to fulfill contracts due to circumstances beyond its control.

The Canadian oil giant had to shut down production at facilities that had been producing around 300,000 barrels of crude per day. And production at the Syncrude oil-sands project, in which Suncor owns a majority stake and which normally produces around 315,000 barrels per day, was also halted.

In a company statement, management noted that there has been no damage to Suncor’s assets, and that the firm will commence restart when it can do so safely and depending on the availability of third-party pipeline infrastructure. CEO Steve Williams believes the company can ramp up production within a few days once it gets the all-clear.

Obviously, a number of oil-sands operators could have some pretty ugly second-quarter numbers. But the damage also extends to the economy as a whole.

The Bank of Montreal already cut its second-quarter gross domestic product (GDP) growth forecast to 0% from 1.5%, due to “severe disruptions to oil production.” However, the bank’s economists also concede that the current forecast is just a placeholder, pending more information.

And economists with Royal Bank of Canada shaved a full point off their estimate of second-quarter GDP growth, lowering their projection to just 0.5% from their previous forecast of 1.5%. RBC noted that while the loss of oil production is the biggest factor in their revised estimate, the fact that so many residents had to be evacuated will also reduce sales outside of the oil and gas sector.

Of course, subsequent quarters could get a boost both from the resumption of normal activity, as well as the stimulus that results from rebuilding.

So overall, while things are bad, they’re not nearly as bad as they could have been.