NEW YORK (Reuters) - Colonial Pipeline Co [COLPI.UL], the biggest U.S. fuel system, said it would shut its main diesel and jet fuel line on Wednesday evening and its gasoline line on Thursday because of outages at its supply points from Tropical Storm Harvey and a lack of supply from refiners.
The news sent U.S. gasoline prices RBc1 surging to a two-year high of $1.9350 a gallon, while margins RBc1-CLc1 jumped to a two-year high of $24.38 a barrel, as Asia markets opened.
The pipeline connects the refineries of the Gulf Coast to the populous East Coast, transporting more than 3 million barrels of fuel every day.
Colonial became the second major fuel pipeline operator with origins in the Gulf Coast to suspend operations because of the storm that brought devastating flooding to the region. The Explorer Pipeline, which has a capacity of 660,000 barrels a day, said on Wednesday it had shut its main fuel line from Houston to Tulsa, Oklahoma, as supplies dwindled.
At least two East Coast refineries have already run out of gasoline for immediate delivery as they scrambled to fill barges to markets typically supplied by the Gulf Coast, two refinery sources said. Others were seen operating at higher rates in order to boost profitability by meeting supply shortages.
“I’ve never seen a situation this bad,” said one East Coast market source.
“Imports can’t make up for this. ... This is going to be the worst thing the U.S. has seen in decades from an energy standpoint.”
Kinder Morgan Inc’s (KMI.N) 700,000-bpd Plantation Pipeline system, which originates in Louisiana and ends in the Washington, D.C., area, remained fully operational, the company’s spokeswoman, Melissa Ruiz, said in an email.
Colonial said earlier it expected outages at its Houston and Hebert area fuel supply points in Texas would likely continue through the weekend as a result of Harvey.
At least 4.4 million bpd of refining capacity were offline, or nearly 24 percent of total U.S. capacity, based on company reports and Reuters estimates. The Gulf is home to nearly half of U.S. refining capacity.
Colonial said of the 26 refineries that connect to the Colonial system, 13 were located between Houston and Lake Charles, Louisiana, an area affected by the storm.
“Once Colonial is able to ensure that its facilities are safe to operate and refiners in Lake Charles and points east have the ability to move product to Colonial, our system will resume operations,” it said in a statement.
The U.S. Environmental Protection Agency said on Wednesday that it had expanded fuel waivers for gasoline throughout the U.S. Southeast in anticipation of supply shortages.
Reporting by Devika Krishna Kumar and Jarrett Renshaw in New York; Editing by Toni Reinhold and Peter Cooney