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East Coast Gas Pains Remain, as Recovery Continues

Gasoline lines are shorter in some parts of the New York metropolitan area, but the fuel distribution and supply network is still far from normal a week after Super Storm Sandy swept through the area.

David Paul Morris | Bloomberg | Getty Images

While progress has been made in restoring gasoline terminals and reopening the Colonial pipeline, some key terminals in the area from Woodbridge, N.J. to Newark remain waterlogged and damaged from the storm. The Department of Energy reported Tuesday that nine of 57 terminals in Sandy's path remain closed, and all are in the New York metropolitan area.

The big Phillips 66 Bayway refinery in Linden, N.J., also hit by the storm surge, is not expected to reopen for another two to three weeks.

"There's widespread destruction at some terminals," said Andrew Lipow, president of Lipow Oil Associates. "I expect it's going to be three to four weeks before they fully return to normal. Every day the situation improves."

Power is being restored to much of the New York region, but many gasoline stations that are reopening and selling their fuel are still not seeing sufficient deliveries.

"The gas lines are shorter, but I'm not seeing much of a difference in the number of gas stations that have reopened," said Sal Risalvato, executive director of the N.J. Gasoline, Convenience, Automotive Association.

"Supply is still having a hard time getting through. It's just not flowing. The reasons are a lack of power at the distribution terminals," he said. "Some terminals have sustained damage from the storm surge and those that are open have very long waits for trucks to fill up."

Risalvato said it is taking longer than he expected to get things moving, in part due to the severity of power outages in the affected Northern New Jersey area. "I'm still confident that the clog will break at any minute," he said.

Hess Tuesday said its Port Reading refinery has partial power but is still not operating. However, its terminal at Port Reading is steadily returning to normal. In fact, it is shipping gasoline on barges to Long Island from its Port Reading, N.J. terminal.

Hess said the only remaining Hess terminal with suspended rack operations is in Bayonne, and its Brooklyn and Roseton, NY terminals have resumed marine operations. Hess terminals with suspended marine operations are in Bayonne, Edgewater, Newark and Woodbridge, N.J.

Hess also said the majority of its stations in the New York/New Jersey metro area remain open, many using back-up generators. In New Jersey, the gasoline supply system is improving, but the situation in New York has been slower to recover.

N.J. Gov. Chris Christie's order that drivers follow odd/even filling days, depending on their license numbers, has eased the situation, he said. Another factor is that more homeowners are having their power restored, and they no longer are joining the gas lines to get fuel for their generators. "Nobody realizes just how much that has caused a problem," he said, noting it takes longer to fill a can than a car and the volume of cans being filled added to the lines.

Weekly data from Mastercard showed gasoline sales in the mid-Atlantic region fell by less than four percent last week. A drop in demand, from drivers kept off the road by the storm, was expected to keep the pressure off of supply.

The Department of Energy Wednesday reported that gasoline stockpiles rose by 2.9 million barrels to 202 million barrels, compared to an expected decline of 1.3 million.

Lipow expects gasoline prices at the pump to slip nationally in the next week, losing as much as five cents per gallon. The storm coincided with a normal period of falling demand, and the national average this week declined to $3.46 from $3.52 a week ago.

But storm hit New Jersey's average price Wednesday was $3.64 per gallon, up from the average $3.55 last week, and New York's average was $3.98, from $3.92 last week. At the Nymex, gasoline and oil futures fell Wednesday.

Lipow said he expects the flow of gasoline through the infrastructure to continue improving this week. The network of terminals, refineries and pipeline in the Linden-Newark area provides about 75 percent of the region's fuel. By the end of the week, he also expects that four major terminals receiving gasoline from the Colonial and Buckeye pipelines.

The government's temporary waiver of the Jones Act, which keeps foreign tankers from bringing goods from one U.S. port to another, has freed tankers to bring refined product form the Gulf Coast to New York.

"There's a significant amount of tankers loading in the Gulf Coast for the New York harbor. Seven to 10 vessels are loading. Every time, I turn around another one is popping up. I think it is good news. They will help cover the supply shortfall," said Lipow, who is based in Houston. Another storm, a Northeaster expected to hit the east coast this Wednesday and Thursday could impact some of the shipping traffic, he noted.

"Some major terminals will be receiving pipeline barrels and then resupply to the truck rack will get better. Then supply to the consumer gets better," he said. "We'll have another terminal in Long Island City reopening this week, and Brooklyn distribution. Newark still appears to be the main problem." Shell's part-owned Motiva terminal in Newark is expected to reopen later this week, and others should follow, he added.

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  • Patti Domm

    Patti Domm is CNBC Executive Editor, News, responsible for news coverage of the markets and economy.

  • A CNBC reporter since 1990, Bob Pisani covers Wall Street from the floor of the New York Stock Exchange.

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