Why consumers pay the price for hurricane fuel shortages

By Devika Krishna Kumar and Libby George

NEW YORK (Reuters) – Just days after Hurricane Harvey smacked Texas and hobbled a quarter of U.S. refining industry, the supply networks that fuel the nation’s cars, trucks and airplanes began to fail.

On paper, there was no fuel shortage. The United States had more than 200 million barrels of gasoline in giant steel tanks scattered across the nation – enough to last more than three weeks.

But the fuel was unavailable to prevent shortages for two reasons: most of it is not owned or managed by the government, sitting instead in commercial facilities, and it is stored far away from where it was needed.

Consumers paid the price as gasoline spiked ahead of Harvey’s arrival and jumped again after the storm as the extent of the disruption to Texas refiners became apparent.

Prices surged even higher when Hurricane Irma hit Florida, which relies on Gulf Coast supply.

That left Florida residents scrambling for fuel in one of the largest evacuations in history. Thousands of stations closed, driving high prices and long lines those remaining open. The supply chain breakdown caused delays and expense at the worst possible time for families fleeing the storm.

The shortages were felt nationally – with an average gas price spike of 10 percent – and internationally, as countries dependent on U.S. exports had to find replacement supplies.

When Harvey shut pipelines and ports that transport millions of barrels of fuel nationwide from the Gulf, it left major cities with only a few days’ supply of fuel.

Pipelines started closing five days after Harvey hit, with nothing to pump through key fuel conduits from Texas to New York, Philadelphia and Chicago.

“It proves to you how vulnerable the country is to the pipelines,” said Dennis Curtis who runs Curtis Oil, a fuel distributor in the Carolinas. “When they go down, it’s a ripple effect all the way to New Jersey.”

The storm’s disruption to domestic and global fuel supplies led the International Energy Agency, the watchdog for energy security in industrialized nations, to call for a review of the way the U.S. government plans for emergencies.

A boom in U.S. fuel production has also made refineries here big suppliers to Latin America and Europe.

“The rise of the Gulf Coast as a major energy hub means that … normal operations are too important to fail,” the IEA said in a report earlier this month.

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