NEW YORK—The largest U.S. fuel pipeline system, Colonial Pipeline, shut down on May 7 after a cyberattack. Nearly half the fuel consumed in the populous eastern United States passes through the network.
What’s the Outlook for Pump Prices?
Prices at gasoline stations are expected to rise if the outage continues. Retail prices across much of the United States follow the lead of benchmark New York gasoline futures. Trading in those futures opened for the week on May 9 up more than 3%, hitting the highest level in three years.
Retail prices began to creep up at the weekend. The national average price increased a cent on the gallon since May 7 to $2.962 a gallon, according to Jeanette Casselano, a spokeswoman for the American Automobile Association.
Which Region is Most Likely to See Price Rises?
The southeast of the United States is the area most dependent on the pipeline and most likely to see supply disruption and price rises.
Previous prolonged shutdowns of the Colonial system have caused gas prices to surge there. In Georgia, for example, gasoline prices rose by more than 30 cents a gallon after a leak forced a 10-day shutdown on the line in 2016.
Demand in some states served by the pipeline—including Alabama, Florida, Georgia and Tennessee—rose about 4.3% on May 8 compared to a week earlier, said Patrick DeHaan, head of petroleum analysis at GasBuddy. He warned drivers against panic buying.
“Rushing out and filling your tank will make the problem much, much more acute and likely double or triple the length of any supply event, if it comes to that,” DeHaan said.
New York and the rest of the U.S. East Coast has access to foreign supplies—typically shipped from Europe. But relying on those could lead to pump price increases too, since foreign shipments are typically more expensive than domestic supplies.
Will Air Travel be Impacted?
The Colonial Pipeline also supplies jet fuel to major airports across the United States and a prolonged outage could have an impact on air traffic, if supply disruptions become severe.
Major airports including Hartsfield-Jackson Atlanta International Airport, Charlotte Douglas International Airport and Raleigh-Durham International Airport (RDU) are monitoring the situation, they said.
The RDU has more than 11 days of fuel on hand, a spokesperson told Reuters.
The pipeline also provides fuel for the U.S. military across bases in the area it covers.
What is Colonial Pipeline?
The 5,500-mile system runs between Houston and Linden, N.J., and transports more that 2.5 million barrels of fuel every day. That is about 45% of all fuel consumed on the heavily populated U.S. East Coast.
Are There Alternatives?
There are alternative pipelines serving some of the areas that receive supplies from Colonial Pipeline’s network, but none have the capacity to fully replace Colonial.
Southeastern states have fewer import terminals to receive fuel by sea than northeastern states.
Supplies would be distributed by road and rail if the outage is prolonged. That would be more expensive than by pipeline and contribute to higher pump prices.
The U.S. Department of Transportation issued a temporary waiver in 17 states that would allow truckers to work longer hours.
Recommended Reading
NOV Announces $1B Repurchase Program, Ups Dividend
2024-04-26 - NOV expects to increase its quarterly cash dividend on its common stock by 50% to $0.075 per share from $0.05 per share.
Repsol to Drop Marcellus Rig in June
2024-04-26 - Spain’s Repsol plans to drop its Marcellus Shale rig in June and reduce capex in the play due to the current U.S. gas price environment, CEO Josu Jon Imaz told analysts during a quarterly webcast.
US Drillers Cut Most Oil Rigs in a Week Since November
2024-04-26 - The number of oil rigs fell by five to 506 this week, while gas rigs fell by one to 105, their lowest since December 2021.
CNX, Appalachia Peers Defer Completions as NatGas Prices Languish
2024-04-25 - Henry Hub blues: CNX Resources and other Appalachia producers are slashing production and deferring well completions as natural gas spot prices hover near record lows.
Chevron’s Tengiz Oil Field Operations Start Up in Kazakhstan
2024-04-25 - The final phase of Chevron’s project will produce about 260,000 bbl/d.