Leaving damage in the billions of dollars and millions of people from the New Jersey coast to central Pennsylvania still without power, Superstorm Sandy launched a deluge of destruction, the effects of which will probably be felt for weeks to come.
Among the looming concerns is its impact on gas prices and the region’s fuel supply. A growing consensus among retailers and other industry observers appears to be neutral and lackluster, even after such an intense event, massive refining shutdown, and inevitable supply disruption.
“While the storm reduces gasoline and diesel supply to terminals from pipelines and refineries, it also reduces demand, with very few cars on the road,” Dan Gilligan, president of the Petroleum Marketers Association of America (PMAA), Arlington, Va., told CSP Daily News. “So it’s difficult to predict how the market will react.”
Essentially, the storm depressed regional fuel demand in an area that is a major net consumer of refined fuel products, noted the report. While a bearish outlook saw prices rise marginally just after the storm passed in many areas, analysts expected that the lowered demand and the expected safety of the many refineries clustered in New Jersey and Pennsylvania will see costs at the pump at some of their lowest points later this week.
Power outages could play a big role going forward. “It’s a huge concern,” said CNBC energy analyst Matt Smith. “Refining utilization in the northeast makes up 7% of the total of the U.S. The three refineries in New Jersey, 240,000 barrels a day, is already shutting down and the other two are cutting back on rates, so that’s really why we’re seeing gasoline prices spike up. When asked about the impact of a longer power outage, Smith relayed a sobering forecast. “If we do see power outages, that would knock refining for perhaps a week,” he said.
Outages are playing in important role at the terminal, according to Don Thibodeaux, director of operations, Fuel Center, for FuelQuest, Houston. Boding well for supply to the area, he said the Colonial Pipeline, which starts in Texas and ends in New Jersey, is undamaged. “So it’s not the pipeline, but the terminals, many of which have lost power and are unable to distribute fuel,” Thibodeaux told CSP Daily News. “That’s where the predominant issue is.”
Tighter supplies and Sandy’s projected path—straight toward the East Coast’s main refining hub—make this storm a bigger deal than last year’s Hurricane Irene. Refineries closed in anticipation of Irene, but having been largely spared, they reopened quickly and 2011’s pre-storm price spike collapsed. (Angel Abcede, CSP Daily News: www.cspnet.com)