Major Pipeline shuts down due to Hurricane Harvey

Posted September 03, 2017

As gasoline lingered at a two-year high, USA oil prices had dropped as demand from refiners quickly fell.

Hurricane Harvey has partially shut down the Colonial Pipeline, which funnels fuel between Houston and the East Coast, CNN Money reports.

Platt's reports ~3M bbl/day of refining capacity remains down in Texas, or 16% of US capacity, and assuming refiners cutting runs or in the process of returning are at 50% of capacity, the total downed capacity rises to 4M bbl/day, or 22% of the USA total.

It's a combination of factors which culminated in the shut down of ten Gulf Coast oil refineries.

In Corpus Christi, Citgo Petroleum Corp said it was beginning to restart its 157,500-barrel-per-day (bpd) refinery, while Flint Hills Resources and Valero Energy Corp were also moving to restart their plants, sources said.

Since Harvey hit last week, North Carolina has seen gas prices jump 18 cents.

Numerous shipments are expected to end up in Latin America, which has become increasingly reliant on gasoline and diesel supplies from the U.S. Gulf Coast in recent years amid fast-growing demand in emerging economies such as Mexico and Brazil, traders said.

With Harvey sliding farther inland over Southwestern Louisiana, Motiva Enterprises LLC's Port Arthur refinery, the country's biggest, began a controlled shutdown. Motiva Enterprises holds exclusive rights to distribute Shell fuels to the majority of the southeast, said Natalie Gunnell, a spokeswoman for Shell's USA products unit.

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One Chevron station in downtown Dallas that sold regular gas for $2.29 a gallon just before the storm was charging $2.99 on Thursday. These closures meant a loss of 2 million gallons of gasoline per day. The station received a tanker load of gasoline on Saturday but was out of diesel, he said. Some rural stations may take an extended number of days to refuel, but most gas stations should see fresh supplies within two to four days.

"It's not a significant problem at the present time, but it could turn into one", said William Fleischli, executive vice president of the Illinois Petroleum Marketers Association, which represents 400 fuel distributors.

As shortages ripple across the East Coast, the most likely suppliers left standing are refiners from Louisiana and Europe, according to Zachary Rogers, a refining and oil products analyst at Wood Mackenzie. Most major Texas ports remained closed to large vessels, limiting discharge of imported crude.

The Colonial pipeline is a crucial artery in the nation's fuel supply network.

"Given the unprecedented flooding in the city of Port Arthur, it remains uncertain how quickly the flood waters will recede, so we can not provide a timeline for restart at this time", the company said. Magellan Midstream Partners announced late on Friday that it resumed operations on its BridgeTex and Longhorn crude oil pipelines.

Colonial Pipeline Co., the biggest fuel transporter in the US, said that "storm-related refinery shut-downs and impact to Colonial's facilities" west of Lake Charles, Louisiana, caused the company to close two of its pipelines.

Phillips 66 also said its Pasadena refined products terminal would resume truck loading for gasoline and diesel this weekend.