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Colonial to restart critical pipeline as gas prices spike and shortages emerge

Cars lined up to get gas at a Costco in Raleigh, North Carolina, on Sept. 19, 2016.
Source: William Little
Cars lined up to get gas at a Costco in Raleigh, North Carolina, on Sept. 19, 2016.

Colonial Pipeline said Tuesday it expects to restore service to its leaking pipeline Wednesday, which would bring some much needed fuel to the Southeast, where gas prices have been spiking.

Colonial's Line 1, which takes fuel from Gulf Coast refineries across the South and up to the mid-Atlantic region, has been down since Sept. 9 when a leak was discovered in Alabama.

The company said it plans to test a 500-foot bypass section, and if it is ready for operation, it anticipates it will be connected to Line 1 and operating Wednesday. Colonial said it should take several days for the fuel delivery supply chain to return to normal.

"As such, some markets served by Colonial Pipeline may experience, or continue to experience, intermittent service interruptions. Colonial continues to move as much gasoline, diesel and jet fuel as possible and will continue to do so until markets return to normal," the company said.

Tom Kloza, global head of energy analysis at Oil Price Information Service, estimated it may take until October for the logistics to return to normal.

"The lack of Gulf Coast gasoline coming north has manifested itself from Alabama to Virginia, a lot less when you get to other points, like Delaware and New Jersey," he said.

He said while RBOB gasoline futures were plunging Tuesday, wholesalers were still seeing prices of 40 cents to 50 cents above futures prices. RBOB futures for October fell 4.7 percent to $1.39 per gallon.

"I still think there's going to be drama in the downstream market with no gasoline or ridiculous prices. Let's hope Colonial gets that pipeline restarted because we really need it," said Kloza.

Gas prices continued rising at the pump overnight, and shortages became more apparent in the 11th day of the outage Tuesday. Drivers in Georgia are seeing some of the biggest increases statewide.

Prices at the pump in Georgia jumped to an average $2.36 per gallon, a hike of 5 cents since Monday for unleaded gasoline, now up 23 cent per gallon since Friday. Experts believe the price hikes will get worse before they get better even if the pipeline is fixed this week.

"It's still going to be a mess in most of the those states, I think through September," Kloza said.

In North Carolina, the price is now $2.19 per gallon, a 6-cent jump since Sunday, and in South Carolina, prices are up at $2.08 per gallon, a jump of 15 cents since Friday.

The worst hit states are in the Southeast, but Delaware saw an overnight price jump of 3 cents per gallon, and gasoline Tuesday was 10 cents more expensive than last week at an average $2.18 per gallon.