Fuel shortages are expanding across several U.S. states in the East Coast and South as filling stations run dry amid the unprecedented pipeline disruption caused by a criminal hack.
From Virginia to Louisiana, convenience stores and corner gas stations are turning away customers as tanks tap out amid panic buying. Even as the White House relaxed some environmental rules to allow gasoline to flow in from other regions, refiners in Texas and Louisiana are curtailing output to cope with logjams of fuel they can’t ship to eastern markets.
Although the shortages have not reached the New York metro area, the premiums demanded for wholesale gasoline and diesel in that market jumped to a two-month high, according to data compiled by Bloomberg.
One Washington D.C.-area fuel distributor warned that “catastrophic” shortages are imminent and called on government officials to order school buses to stay off the roads. Four days into the crisis, Colonial Pipeline Co. has only managed to restart a small segment of the pipeline as a stopgap measure and doesn’t expect to be able to substantially restore service before the weekend.
Beyond that, Colonial has said very little about its next steps, leaving oil refiners and distributors in the dark about what may happen over the next 48 hours. Companies that rely on the pipeline are increasingly frustrated about the lack of transparency, according to a shipper who asked not to be named discussing commercial conversations.
“We have been providing daily and sometimes twice daily updates to our shippers, and have been in close contact with law enforcement and federal agencies to relay information on our restoration efforts,” Colonial’s media relations office said in an email. “We will continue to keep all of our stakeholders informed and appreciate the outpouring of support we have received throughout the industry.”
U.S. average retail gasoline prices have risen to their highest since late 2014 due to the disruption, almost touching $3 a gallon. That could add to broader inflationary pressures as commodity prices from timber to copper also surge.
“It’s going to be catastrophic,” said John Patrick, chief operating officer of Liberty Petroleum LLC. “Governors should declare a state of emergency and ask people chasing tanker trucks to gas stations to stay home. School buses stay put.”
Meanwhile, federal transportation regulators took the first step toward waiving rules that prohibit foreign-flagged and -staffed ships from hauling products from one U.S. port to another.
Total SE and Citgo Petroleum Corp. are among refiners that have reduced fuel production in response to the pipeline shutdown. Others—including Valero Energy Corp., Phillips 66 and Marathon Petroleum Corp.—are renting tankers in the Gulf of Mexico to hold excess gasoline and diesel for as long as 40 days, according to people familiar with the matter.
Barges, Trucks
Gasoline isn’t the only oil-derived product under threat. In an effort to bolster jet-fuel inventories, Southwest Airlines Co. has begun flying supplies to Nashville, Tennessee, and other cities. So far, no Southwest flights have been affected by the pipeline closure; rather the airline said it’s “actively managing” fuel stockpiles.
The Colonial pipeline is the most important conduit for distributing gasoline, diesel and jet fuel in the U.S., connecting refineries along the Gulf Coast to population centers from Atlanta to New York and beyond. Each day, it ships about 2.5 million barrels (105 million barrels), an amount that exceeds the entire oil consumption of Germany.