Gasoline spikes in some states as pipeline outage nears end

A gas station pumps are closed due to gas shortage in Raleigh, N.C. on Sept. 20, 2016.
Photo: William Little
A gas station pumps are closed due to gas shortage in Raleigh, N.C. on Sept. 20, 2016.

Colonial Pipeline is set to restart its troubled pipeline Wednesday night, raising the prospect that gas lines, fuel shortages and price spikes plaguing the Southeast may be nearing an end.

The pain at the pump could continue in some areas for several more days or even a week, as fuel travels across the system.

The pipeline, which sprang a leak in Alabama, carries gasoline from Texas to New Jersey.

"The Carolinas are ground zero at the moment. Georgia is starting to get some product," said Tom Kloza, head of global energy analysis at Oil Price Information Service. The entire service area for the pipeline has seen price hikes to some extent, but in places like New Jersey, the increases have been minimal — up just 3 cents on average over the last week compared with Georgia, where unleaded gasoline has surged almost 30 cents a gallon in just a few days.

"I'm guessing it persists into next week. This weekend is going to be tough. A lot of pumps are without fuel," Kloza said.

Colonial constructed a bypass to restore the pipeline which was down since Sept. 9, after the leak was discovered.

Colonial expects to see immediate relief in some areas, but not across its system.

"Subsequent to restart, it is expected to take several days for the fuel delivery supply chain to return to normal," it said in a statement. "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 as markets return to normal."

Gas prices nationally held steady overnight at an average $2.21 per gallon, but South Carolina drivers saw a 4-cent jump in unleaded gasoline, an average increase of 18 cents per gallon since Friday. The average pump price in that state is $2.12 per gallon, according to AAA. North Carolina drivers saw a 2-cent jump overnight and are paying an average $2.21 per gallon.

Analysts still expect to see some of the cheapest prices this autumn in the past eight years due to the glut of refined product. Because of the pipeline outage, gasoline has continued to back up in the Gulf Coast.

RBOB gasoline futures rose more than 2 percent Wednesday. Kloza said he is seeing early reports of wholesalers selling fuel about 20 cents over the futures price. That compares with 40 and 50 cents Tuesday.

"Some of the people that were selling it at 40 to 50 cents over futures prices are out of fuel. It's a scramble for distributors to find fuel," Kloza said.

Some of the shortages were caused by drivers themselves. "They'll be back to normal within a week," said Andrew Lipow, president of Lipow Oil Associates. "A lot of people ran to the pump to fill up so it created demand early. With the Colonial start-up over the next five days, terminals will be getting supplies."

But he said the Carolinas could take a few days to clear. "There's no other way to get barrels in there. It's right in the middle of the Southeast," he said. Further up the East Coast, gasoline could be shipped in to ports from Baltimore to New York.