Spot gas shortages could worsen if Colonial Pipeline doesn’t reopen by the weekend

Spot gas shortages could worsen if Colonial Pipeline doesn’t reopen by the weekend

Via CNBC.com:

If the Colonial Pipeline is not back in business by the weekend, prices could continue to rise at the pump and there will be broader localized fuel shortages across the southeast and mid-Atlantic regions.

Gasoline stations that could not get enough fuel were already closed in some states, and prices jumped overnight, by as much as 10 cents or more per gallon in some areas.

“This turns into a crisis by the end of the week, if it’s not resolved, particularly with Memorial Day coming,” said John Kilduff, founding partner of Again Capital. “People are going to start topping off their tanks.”

It’s not that there’s not enough fuel. There’s plenty in the refining centers on the Gulf Coast.

The issue is that gasoline, jet fuel and diesel are stuck in the wrong places. Moving it requires a hodgepodge of solutions, and analysts say it will be impossible to meet demand without the pipeline.

Colonial Pipeline stopped operations Friday and notified federal officials that it was the victim of a ransomware attack. The attack, carried out by a criminal cyber crime group known as DarkSide, resulted in the shutdown of 5,500 miles of pipeline. The artery supplies half of the gasoline to the east coast and runs from Texas to New Jersey.

The pipeline company said it expects to restore a substantial amount of operations by the end of the week, but how much is not clear. U.S. Energy Secretary Jennifer Granholm said federal agencies are working around-the-clock to help the pipeline return to normal operations.

The shutdown arrives at an inopportune time: The beginning of what could be a record summer driving season as Americans make up for last year.

“Given the size and the direction of the pipeline and the market that it feeds, the Colonial Pipeline is the single most important artery moving refined products in the country,” said Michael Tran, energy analyst at RBC. “This is already an earthquake and the magnitude of the earthquake just grows by the day.”

The national average for a gallon of unleaded gasoline jumped to $2.985 Tuesday, an increase of 6 cents in the past week, according to AAA.

Regionally, however,the price increases were sharper, AAA found. In South Carolina, for instance, gasoline prices were up more than 6 cents since Monday and 13 cents in the past week. In Georgia, drivers were paying $2.87 per gallon Tuesday, an increase of of more than 10 cents in just one day and 17 cents in a week.

A rise of 3 more cents per gallon would put the average U.S. selling price at the highest level since November 2014.

“We are seeing the full fledge panic at the moment in some of the places I suspected we might see it,” said Tom Kloza, head of global energy analysis at OPIS. “There aren’t enough drivers to take trucks from terminals that have gasoline to stations. We are seeing a lot of stations running out. Georgia seems to be ground zero.”

Kloza said he expects gasoline prices to rise, but not spike wildly higher. The bigger issue is that gasoline will be in short supply in the region, since it takes time to replace once the pipeline is switched on and outages could continue.

Gasoline in the pipeline travels at just 5 miles per hour.

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