Petrol shortage hits America, fuel prices go up

Posted September 04, 2017

The Colonial Pipeline is partially underwater in Houston due to heavy flooding from Harvey and that is sending gas prices soaring in the Carolinas.

The shutdown of a portion of the Colonial Pipeline, which provides about 40 percent of the South's gasoline, should not cause a spike in gas prices, an official said Thursday.

The company's pipelines connect refineries along the U.S. Gulf Coast to markets in the Northeast, transporting more than 3 million barrels a day of gasoline, diesel and jet fuel.

The energy situation during Harvey differs from Hurricane Katrina, when the Colonial pipeline was forced to temporarily close from power outages.

Almost one-third of the nation's refining capacity is along the Gulf Coast from Corpus Christi to the Lake Charles, Louisiana, area, according to the Associated Press, and about one-quarter of the Gulf Coast's oil refining capacity was taken offline. Governor Roy Cooper declared a state of emergency in the wake of the Colonial Pipeline Shutdown.

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.

The Colonial Pipeline carries more than 100 million gallons of gas from Houston to the Triad.

"When you see what's going on in Houston, you can hardly refer to an increase in gas prices as "pain" at the pump", Tidwell said.

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Tropical Storm Harvey's effect on the energy industry has spread beyond flooded United States refiners as fuel pipelines are also shut, threatening a supply squeeze around the country and roiling world markets as traders scramble to find alternative supplies. Valero started telling its customers that sell fuels to gas stations Wednesday that it can't meet its contractual supply agreements.

Shipments of gasoline by pipeline out of southeast Texas will be reduced, which means that areas along the Atlantic coast and in the Midwest that normally receive these supplies will have to buy from Europe, Africa or Canada, driving up costs and, ultimately, the pump price. The average price per gallon in NY rose from $2.504 to $2.538 from Wednesday to Thursday, according to AAA.

Just yesterday, it was $2.20 and last week's average was $2.13.

Concerns over fuel shortages ahead of the U.S. Labor Day extended weekend were mounting, said analysts at JBC Energy. According to IHS Markit, the city is "faring the best" among the cities on the Texas coast that were badly hit, with its four major refineries set to resume operations this week.

Colonial continues to ship as much gasoline and other refined products as available from Louisiana-based refineries and other refineries on the Colonial system east of Lake Charles, and will continue to do so as markets return to normal.

The Energy Department announced Thursday morning that the agency would pump 500,000 barrels of oil from the USA strategic reserve.

Other Port Arthur refineries also shut overnight, including Total's plant, where sources familiar with plant operations say they expect the water to recede by the weekend.