Published: Sun, September 03, 2017
Hi-Tech | By Merle Christensen

Harvey shuts down major fuel pipeline supplying Alabama, East Coast

Harvey shuts down major fuel pipeline supplying Alabama, East Coast

Refinery closures along the Texas coast in the wake of Hurricane Harvey are creating gas shortages in the Dallas-Fort Worth area.

Colonial Pipeline is expected to temporarily close its gasoline pipeline that supplies much of the Southeast, including SC, as the extended Labor Day holiday weekend approaches.

Retail U.S. gasoline prices hit two-year highs and global shipping routes were scrambled as the nation's largest refiners remained shut on Friday, even as Harvey was losing strength. The Pipeline originates in Houston and supplies the East Coast. "For the same reasons, we expect that Line 1, which transports gasoline and is now operating at reduced rates, will suspend service tomorrow (Thursday)", according to the press statement. The portion of the system east of Lake Charles would continue to operate, though "deliveries will be intermittent and dependent on terminal and refinery supply".

It is hard to overstate the critical role that the Colonial Pipeline plays.

It knocked out about 4.4 million barrels of daily refining capacity - slightly more than Japan uses daily - and the signs of restarts were tentative. At the same time, gasoline supplies rose by 35,000 barrels and crude production also increased. With its supplying refineries closed in the area, the pipeline operator cited reduced output as the reason for suspending its transportation operations. Line 2 transports mostly diesel and aviation fuels. "Consumers will see the impacts of these disruptions and higher cost alternatives in higher prices paid at the pump".

They anticipate having everything back online by Sunday. He explained refineries in Texas are simply underwater and shut down a portion of the pipeline until the water recedes.

NY is heavily dependent on gas from pipelines like Colonial, and consumes the fourth most amount of natural gas in the country behind only Texas and California, according to the Energy Information Administration (EIA).

The price surge reflects the market's anticipation that supplies will start to run low as long as the Colonial pipeline is shut down.

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The pipeline provides almost 40 percent of the South's gasoline.

GasBuddy analyst Patrick DeHaan says there's a squeeze on refineries that are up and running. An Exxon brand station across the street was out of fuel.

East Coast refineries are struggling to keep up as the gap has grown too big.

"This is going to be the worst thing the USA has seen in decades from an energy standpoint", said an East Coast market source, who did not want to be identified because he was not authorised to speak to the press. "Imports can't make up for this". Elsewhere, OPEC officials voiced frustration that Harvey did not boost crude prices, despite the major disruption of USA energy infrastructure.

"The market right now is more anxious about the tropical storm than they are about the weekly inventory", said Matt Sallee, who helps manage $16 billion in oil-related assets at Tortoise Capital Advisors LLC, by telephone. WTI has suffered a heavy discount relative to Brent, so the USA will have no problem finding customers, even as far away as Asia.

One terminal operator in the New York Harbor region which receives distillate fuel supplies from Colonial said it expects disruptions to its next batch of supplies set to arrive on September 6.

The federal government is also trying to accelerate the recovery. Additionally, DOE released 500,000 barrels of oil from the U.S. Strategic Petroleum Reserve - the nation's reserve of crude oil.

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