Panic Grips Eastern U.S.
Gasoline prices in the U.S. Southeast spiked in September after a major gasoline pipeline suffered a leak and was forced to temporarily shut down. The Southeast may see gasoline prices rise again because the problems with the pipeline are not over.
The Colonial Pipeline is a 2.5 million barrel per day system that carries refined products such as gasoline, diesel, jet fuel and heating oil. It consists of a massive 5,500 miles of pipeline, traveling from the Gulf Coast up to the mid-Atlantic. Fuels refined along the Gulf Coast can reach as far as New York Harbor.
On September 9, the Colonial Pipeline system was hit with a “system integrity issue” in Alabama, the company said, and was forced to shut down Line 1. That was a euphemism for a gasoline leak in the pipeline – about 8,000 barrels leaked in Alabama – which interrupted the flow of 1.4 million barrels per day of gasoline.
That was a problem for the U.S. Southeast because “there are no refineries between Alabama and Pennsylvania that produce substantial quantities of transportation fuels,” the U.S. Energy Information Administration said in September, adding that “the U.S. Southeast is supplied primarily by pipeline flows from refineries along the U.S. Gulf Coast and supplemented by marine shipments from the U.S. Gulf Coast and imports.”
The outage of the Colonial Pipeline led to a higher gasoline prices at the pump because there are few alternatives. Some cities with ports such as Savannah, Georgia, and Charleston, South Carolina, can receive shipments from the global market, but otherwise the region is isolated. When Colonial shutdown, some retail outlets ran out of fuel. A Virginia petroleum association member told Argus Media that it was “the worst outage he had seen in 17 years.” The outage led to an 8-cent per gallon increase in PADD 1C, which covers the southeast.
In Conclusion...This gasoline spike shows our energy delivery system is fragile and supplies can be interupted.
Reference: Nick Cunningham (2016, October 5, Pipeline Outage Could Lead To Another Gasoline Spike, OilPrice.com