Pipeline shutdown pushes up East Coast fuel prices, but don’t worry about gas lines yet

Gasoline prices edged up Monday on the East Coast as traders prepared for tighter energy supplies following the temporary closure of a major fuel pipeline due to a cyber attack. But most energy analysts say it’s premature to get worried about gas lines and fuel shortages.

“Right now there are no supply shortages,” White House Homeland Security adviser Elizabeth Sherwood-Randal said at a news briefing Monday.

The operator of the Colonial Pipeline said Monday that it hoped to restore service by the weekend to the pipeline, which connects Gulf Coast refineries to 13 states between Texas and New Jersey. The pipeline supplies 45% of the fuel consumed on the East Coast, according to the company’s website. Colonial shut down operations on Friday due to a ransomware attack, which the FBI attributed to DarkSide, a criminal ransomware group based in Eastern Europe.

Wholesale fuel prices surged 6 cents a gallon Sunday night, but settled down Monday and were up only a fraction in afternoon trading.

“I don’t think it’s going to be a big issue,” said Tom Kloza, the global head of energy analysis for the Oil Price Information Service. “I don’t think this is a seminal event in terms of fuel prices or fuel supply.”

The shutdown of the Colonial Pipeline might have had a sharper impact before the pandemic on the Philadelphia region, where four refineries have closed or curtailed operations in the last decade because of oversupply.

But fuel consumption is down about 10% from pre-coronavirus volumes, and fuel importers have alternative routes to bring in supplies by vessels. There is also plenty of diesel, gasoline and jet fuel in storage in the region, Kloza said.

States such as Georgia, Tennessee, and the Carolinas are more dependent upon the Colonial Pipeline for supply, and airports in Atlanta, Raleigh-Durham and Charlotte operate with only a few days of jet fuel in storage, Kloza said. But airlines serving fuel-starved cities can compensate by flying aircraft with enough jet fuel in their tanks to make onward destinations, Kloza said.

Gasoline prices could rise 3 to 7 cents a gallon this week in Mississippi and Tennessee, according to AAA, as well as in states from Georgia to Delaware.

The shutdown of the pipeline also might have had more serious implications if it had occurred later in the month, when Americans typically begin summer driving season at Memorial Day.

Average nationwide fuel prices were already up about 32% this year from $2.25 to 2.97, according to AAA, and have surpassed $3 a gallon in much of Southeastern Pennsylvania.

The region has become more dependent upon the Colonial Pipeline in recent years after refinery production declined on the East Coast from 1.6 million barrels a day in 2000 to 648,000 barrels a day last week, according to U.S. Energy Department data.

Much of that decline was caused by the closure of refineries in Marcus Hook and Westville, Gloucester County, and the shutdown of the Philadelphia Energy Solutions refinery in South Philadelphia, the largest refinery on the East Coast until it closed down in 2019 following a massive explosion. PBF Energy also shut down much of the production at its Paulsboro refinery in December.

One new source of fuel supplies for the region comes from the Mariner East pipeline system, owned by Energy Transfer LP. Mariner East’s three pipelines were primarily designed to deliver natural gas liquids such as propane and ethane from the Marcellus Shale region to a fuel terminal in Marcus Hook, the site of one of the former oil refineries.

As Energy Transfer is nearing completion of the three Mariner East pipelines, the company says it is converting part of the smallest and oldest pipeline to deliver refined fuels from Midwestern refineries to the East Coast, providing a backup supply to the region. The company said it could provide about 20,000 to 25,000 barrels a day of Midwestern fuels to Northeast markets when it goes online this spring.

Ironically, the Mariner East 1 pipeline that Energy Transfer is converting to carry refined products from the Midwest was built more than 80 years ago to deliver gasoline, diesel and heating oil in the other direction — from Philadelphia refineries to customers in Western Pennsylvania and beyond.

In 2014, it was converted to carry gas liquids from fracked Marcellus Shale wells to Marcus Hook.

Energy Transfer’s plan is to use the pipeline to move fuels in either direction to take advantage of price differences between East Coast markets and the Midwest.