Motorists pulling up to the pumps Wednesday may be wishing they filled up a day earlier, after prices jumped overnight by almost as much as 25 cents a litre.

The price hikes come amid reports of massive damage caused by hurricane Katrina, which slammed into the U.S. Gulf Coast on Monday.

Katrina sent seven oil rigs adrift and forced the closure of eight refineries in the Gulf region.

The Gulf of Mexico accounts for one-quarter of total U.S. oil output, and Katrina has shut down an estimated 95 per cent of crude production in the area.

"That's essentially the entire refining capacity of Canada," said CTV's David Akin. "That's called a severe supply shock, and that really affects the wholesale market, or the price at the refineries."

The supply shock was felt hardest in the U.S., where some retailers were put on gasoline rations by their wholesalers.

Dane Baily, vice president of the Canadian Petroleum Products Institute, describes the gasoline market as a "continental market," which means gas prices are basically uniform on a wholesale level across North America.

"We'll be paying the market price -- because supply and demand are very tight and any disruption to either in a negative context drives prices to record levels," Baily told CTV News.

Akin explains much of the gas Canadians use in the eastern part of the country comes from refineries in OPEC nations and countries in Latin America such as Venezuela, which are now providing oil to the U.S. at much higher prices.

"So if people in eastern Canada want gas, they have to match the price that people in New Orleans, for instance, are willing to pay, which is $1.20."

"That's how the wholesale price rapidly rose."

These explanations, however, seemed to do little to ease anger in Canada.

"Who knows? They always come up with some explanation as to why it's high," one woman told CTV News in Toronto.

Another consumer at the pumps said: "It sucks. Big Time. But there's not too much we can do about it if we wanna drive."

Liberal MP Dan McTeague called on the government to impose a temporary freeze on gas prices, saying there's no justification for the gas hikes.

"Our American friends on the Gulf Coast experienced a Category 5 Hurricane. Unfortunately, consumers in Canada are facing a Category 5 fleecing in Canada as a result of that. That's simply unacceptable."

In Toronto, the price of gasoline at some stations hovered at about $1.20 a litre. Elsewhere in the country:

• In Montreal, gas prices hit $1.15 a litre.
• On the West Coast, motorists were paying about $1.24 per litre in Vancouver.
• Even in oil-rich Alberta, gas prices in Edmonton hit $1.23 a litre at one point.
• Out east, in Fredericton, motorists could expect to pay as much as $1.19 a litre.
• In Gander, Nfld., prices weren't much better, coming in at $1.17 a litre Wednesday morning.
• In the Prairie provinces of Saskatchewan and Manitoba, gas prices hit $1.20 a litre in Regina, and $1.09 a litre in Winnipeg.

U.S. measures

To help refiners affected by the hurricane, Washington has announced it's releasing oil from petroleum reserves.

The move is designed to give refineries a temporary supply of crude oil.

The U.S. government also announced Wednesday it would loan oil to refiners facing shortfalls and relax environmental restrictions on the type of gasoline sold during summer in order to boost supplies.

The announcement caused oil prices to plunge briefly to under $69 US a barrel. Before that, the price was $70 US a barrel. However, it did return to those prices after the announcement.

Ripple effect

Michael Kane of Report on Business Television said the higher prices at the pumps could be felt elsewhere, such as supermarkets.

"It has an inflationary effect in that so much of what we eat, for example, is transported by truck," Kane told Canada AM on Wednesday.

Large companies that use trucks to transport food will pass along the higher cost of gas to consumers.

"In your grocery stores, pretty soon you'll start seeing signs going up around the vegetable section saying, 'Due to recent weather problems, there are very few shipments of' whatever we get from the United States."

Tasha Kheiriddin, the Ontario director of the Canadian Taxpayers Federation, says Ottawa should take 5 cents a litre of fuel taxes off gas prices.

"The government could easily step in and lower gas prices," she told CTV. "It's something that the government really should be looking at."

Prime Minister Paul Martin has already ruled out such a move. And federal Finance Minister Ralph Goodale says cutting taxes would be pointless because the savings would be too small to make a difference to consumers.

"Consumers would notice something," Kheiriddin said.

"The fact that they don't want to do anything I think speaks volumes about their commitment to consumers and to taxpayers."

With a report by CTV's David Akin in Ottawa