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The spike in gasoline futures just faded as Colonial pipeline looks like it may restart

The company said it hopes to restart the line Saturday, but it warned that its projection could change.

Colonial Pipeline said it hopes to restart its major gasoline pipeline between Gulf Coast refiners and customers in the East and Southeast by noon Saturday, ending some market speculation about huge gasoline price spikes and shortages.

Gasoline futures surged as much as 15 percent overnight on reports that Colonial's gasoline pipeline, Line 1, and its distillate pipeline, Line 2, were shut down after a crew working on Line 1 in Shelby County, Alabama, hit the line with a track hoe, causing a fire. One person was killed and several injured.

RBOB gasoline futures for December jumped on speculation that the outage could be worse than the one on Line 1 that occurred in September, when a leak was discovered in the same county in Alabama. That disrupted shipments of gasoline primarily to the Southeast, causing temporary price spikes. Colonial said Line 2 was restarted at midnight and could be converted temporarily to carry gasoline.

"Even if they don't make it by Saturday noon, you miss four or five days. It's not a big deal. But it's a big deal for Colonial and people who bought in the panic in the futures market," said Tom Kloza, global energy analyst at Oil Price Information Service. RBOB futures were about 8 percent higher ahead of the late-morning announcement. Once Colonial reported its plans to restart the line, futures fell but remained up about 4 percent on the day at $1.48 per gallon.

The national price at the pump for a gallon of unleaded gasoline was $2.20 per gallon Tuesday, off about a half cent from Monday's average, according to AAA.

Kloza said gas prices may rise in some places as incoming supplies slow down, but nationally, the price of gasoline should increase by only about 5 cents in the next week, and the national average on Election Day could be about $2.25, slightly higher than last year's $2.19. The Colonial pipeline traverses the South and then stretches north to its terminal in Linden, New Jersey.

Gasoline in the spot market also jumped sharply, with New York harbor spot prices up as much as 18 cents Tuesday morning. Those prices came off their highs, and spot crude was up just several cents per gallon, slightly above the futures price.

Colonial said it has observed no effects on nearby waterways or drainage paths. The company also said that as a precaution, containment booms have been deployed at two different locations on the Cahaba River.

The company said its response crews isolated the fire, but access to the site is still limited. It said it hopes to restart the line Saturday but it cautioned its projection could change when it has additional information from the site.

Alabama Gov. Robert Bentley on Tuesday declared a state of emergency for the state due to the explosion and fire at the pipeline. The state of emergency is effective Nov. 1 through Dec. 1, unless ended sooner.

Colonial said it is working with federal, state and local agencies, including the U.S. Environmental Protection Agency and U.S. Department of Transportation.