Cyberattack halts fuel movement on Colonial Pipeline (5/12/2021)

By admin In Chemical Industry On May 31, 2021

Cyberattack halts fuel movement on Colonial Pipeline

Colonial Pipeline is a major mode of shipping for transportation fuels and other refined petroleum products that spans from the U.S. Gulf Coast to the East Coast. On Friday, May 7, the pipeline halted operations to contain the effects of a cyberattack. As of Wednesday, May 12, the pipeline had not resumed operations of its main lines, although some smaller lines are still operational. The company announced that it hopes to restore service by the end of the week.

Our most recent PADDs 1A and 1B) were a combined 40.0 million barrels, 0.4% higher than the five-year (2016–2020) average. Total motor gasoline stocks in the Lower Atlantic region (PADD 1C) were 24.6 million barrels, 6.5% lower than the five-year average. Next week’s WPSR release on May 19 will include inventory data through May 14, showing the outage’s impact on regional inventories.

Figure 1. East Coast (PADD 1) regional motor gasoline inventories

Colonial Pipeline, a 2.5-million-barrel-per-day (b/d) system of approximately 5,500 miles of pipeline, is a significant mode of shipment for transportation fuels to the U.S. East Coast, particularly for several states in the Southeast (Figure 2). The pipeline carries refined petroleum products such as gasoline, diesel, heating oil, and jet fuel from Houston, Texas, up to Linden, New Jersey, and serves several markets along the route through various branch lines. Because no refineries between Alabama and the mid-Atlantic produce substantial quantities of transportation fuels, the southeastern United States is supplied primarily by pipeline flows and, to a lesser degree, by direct marine shipments from the U.S. Gulf Coast and imports.

Figure 2. U.S. ethane and naphtha spot prices

Until Colonial Pipeline resumes operation, petroleum distribution terminals in the Southeast will rely on inventories and supplies obtained from alternative sources, such as the smaller 720,000 b/d Products (SE) Pipeline that also carries petroleum products from the U.S. Gulf Coast to as far as Washington, DC.

Pipeline shipments move at approximately five miles per hour, so some markets may need to rely on regional inventories for several days after Colonial Pipeline service is restored. Markets along the Atlantic Coast with access to deepwater ports (such as Savannah, Georgia; Charleston, South Carolina; Wilmington, North Carolina; and Norfolk, Virginia) can receive limited imports from the global market and marine shipments via coastwise compliant shipping from the U.S. Gulf Coast. Central Atlantic and Northeast markets can import petroleum products from Europe and Canada and can also obtain supplies from in-region refineries.

Federal and state governments have issued regulatory waivers and notices to loosen restrictions on trucked shipments of petroleum products. As of May 9, the Federal Motor Carrier Safety Administration issued waivers on driving time for truckers delivering refined petroleum products for 17 states and the District of Columbia, then adding West Virginia on May 11. On May 11, the U.S. Environmental Protection Agency issued a temporary waiver through May 31 on the Reid vapor pressure requirements for fuel sold in reformulated gasoline areas in 11 states and the District of Columbia, as well as specific counties in Florida, in an effort to better facilitate the supply of gasoline. The White House has indicated its willingness to review requests for temporary maritime waivers on ships transporting fuel from the Gulf Coast to affected areas.

Until service on the pipeline is restored, the refiners in the Gulf Coast region (PADD 3) that normally feed product into the pipeline will also face increasing pressure to reduce motor fuel production as regional inventories in the U.S. Gulf Coast begin to fill to capacity because of logistical constraints without flows through the Colonial Pipeline. Although coastal barges can move some products, the increased costs and availability of vessels will hamper the ability of Gulf Coast refiners to supply East Coast demand. Run cuts at the Citgo Lake Charles refinery, Total Port Arthur refinery, and Motiva Port Arthur refinery have already been reported.

The regional average gasoline retail price on May 10 was $2.86 per gallon (gal) for the East Coast, an increase of nearly 9 cents/gal from the previous week. For the Lower Atlantic (PADD 1C), the retail price was $2.78/gal, an increase of 9 cents/gal from the previous week and the highest increase of any other region or subregion (Figure 3).

Figure 3. East Coast (PADD 1) regional gasoline retail prices

U.S. average regular gasoline and diesel prices increase

The U.S. average regular gasoline retail price increased more than 7 cents to $2.96 per gallon on May 10, $1.11 higher than the same time last year. The East Coast price increased nearly 9 cents to $2.86 per gallon, the Gulf Coast price increased more than 8 cents to $2.67 per gallon, the Midwest price increased nearly 6 cents to $2.87 per gallon, the West Coast price increased nearly 5 cents to $3.65 per gallon, and the Rocky Mountain price increased more than 4 cents to $3.06 per gallon.

The U.S. average diesel fuel price increased more than 4 cents to $3.19 per gallon on May 10, 79 cents higher than a year ago. The Rocky Mountain price increased nearly 6 cents to $3.31 per gallon, the East Coast and Midwest prices each increased nearly 5 cents to $3.16 per gallon and $3.13 per gallon, respectively, the Gulf Coast price increased more than 4 cents to $2.97 per gallon, and the West Coast price increased nearly 3 cents to $3.69 per gallon.

Propane/propylene inventories rise

U.S. propane/propylene stocks increased by 2.5 million barrels last week to 44.0 million barrels as of May 7, 2021, 9.1 million barrels (17.1%) less than the five-year (2016-2020) average inventory levels for this same time of year. Gulf Coast, Midwest, and Rocky Mountain/West Coast inventories increased by 2.0 million, 0.6 million, and 0.2 million barrels, respectively. East Coast inventories decreased by 0.3 million barrels.

For questions about This Week in Petroleum, contact the Petroleum Markets Team at 202-586-4522.

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