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PSEG says it may know what caused an underground transmission cable to spring a leak that sent hundreds of gallons of an oily fluid into a South Shore canal.

“It looks like tie-dye,” said 11-year-old Frankie Leggio, of Oceanside, pointing to the rainbow sheen floating across the East Rockaway Channel.

That shimmering hue on the water is oil, hundreds of gallons of dielectric fluid that began pouring into the channel Monday night.

The Leggios, who spend their summers boating and enjoying their backyard along the water, say the area has transformed into a “sluggy mess.”

PSEG says they’ve found the source of the leak and are continuing their investigation. Early evidence points to third-party damage to one of their underground transmission pipes.

In response, crews have been working around the clock to clean up the spill.

PSEG states the oil is not harmful to humans, but wildlife experts say the effects on birds especially ducks can be devastating.

“They are out on land more than they would normally be,” said Danielle Wilson, of Humane Long Island.

The oil mats their feathers, making it hard to fly, stay warm or escape predators.

“As they get this oil on them, it is not as easy to get it off,” Wilson explained.

So far, at least four birds recovered from the murky waters have died, according to rescuers.

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