U.S. fuel shortages from Harvey to hamper Labor Day travel

By Devika Krishna Kumar and Jarrett Renshaw

NEW YORK (Reuters) – Travelers and fuel suppliers across the United States braced for higher prices and shortages ahead of the Labor Day holiday weekend as the country’s biggest fuel pipelines and refineries curb operations after Hurricane Harvey.

Just six days after Harvey slammed into the heart of the U.S. energy industry in Texas, the effects are being felt not just in Houston, but also in Chicago and New York, and prices at the pump nationwide have hit a high for the year.

(For a graphic on Harvey’s impact on oil and gasoline markets, click http://tmsnrt.rs/2iK0YD9)

Supply shortages have developed even though there are nearly a quarter of a billion barrels of gasoline stockpiled in the United States. But much of it is held in places where it cannot be accessed due to massive floods, or too far away from the places it is needed. Some of it is unfinished, meaning it needs to be blended before it can go to gas stations.

Harvey has highlighted another weakness in the system: pipeline terminals typically only have a five-day supply in storage to load into the lines.

Some of the biggest pipelines in the United States, supplying the northeast market and the Chicago area, have already shut down or reduced operations because they have no fuel to pump.

“Gasoline is very much a ‘just-in-time’ fuel, for as many million barrels as they think we have,” said Patrick DeHaan, petroleum analyst at GasBuddy. “Sure, they are somewhere, but they still have to be mixed and blended together.”

At least two East Coast refiners, including Philadelphia Energy Solutions and Irving Oil, have already run out of gasoline for immediate delivery as they have rushed to send supplies to the U.S. Southeast, Caribbean, Mexico and South America to offset the lack of exports since Harvey, sources said.

Wholesale gasoline and jet fuel prices have soared as at least 4.4 million barrels per day of refining capacity, or nearly 24 percent of total U.S. capacity, has been closed due to the record rains.

“Since Friday, my cost has gone up 30 cents per gallon,” said Ben Little, owner of independent station Ben Little Pure, in the middle of Nashville.

The U.S. Environmental Protection Agency issued fuel waivers in 38 states and Washington, D.C. to ease concerns of supply shortages.

The Energy Department released 500,000 barrels of crude from the Strategic Petroleum Reserve on Thursday. But the market is not short of crude, which makes up the majority of the…

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