28 February 2012 23:21 [Source: ICIS news]
HOUSTON (ICIS)--A US labour union said on Tuesday a new government report bolsters the group’s contention that the closure of a sixth refinery serving the northeast would increase regional retail and wholesale distillate and gasoline prices.
“This report reinforces everything we have been saying for the past six months about the devastating effect the closure of the [Philadelphia] oil refineries will have on oil workers, energy markets and consumers throughout the northeast,” said United Steelworkers president Leo Gerard.
Five refineries producing for the northeast US have shut down since 2010, and Sunoco’s 335,000 bbl/day Philadelphia refinery in Pennsylvania is scheduled to shut by July if not sold before then.
The US Energy Information Administration (EIA) released a report on Monday regarding the market impact of the shutdowns.
The northeast states are moving towards the use of ultra-low sulphur diesel (ULSD), but winter sources will be limited because other countries have little ULSD production capability, the EIA said.
Some products are shipped from the US Gulf to Pennsylvania via the Colonial Pipeline. The US Gulf produces the highest US amount of ULSD and suppliers may reduce gasoline pipeline shipments in favour of ULSD shipments to the northeast, the EIA report said.
This could ease prices for ULSD, but would require more gasoline from the midwest and New York Harbor truck routes, adding pressure to gasoline prices, said the EIA report.
Pennsylvania and New York are primarily supplied by local production and are hurt significantly by the refinery closures. Other areas of the US northeast rely on multiple sources, such as local refineries, imports and domestic shipments.
Gasoline imports to the US east coast increased to 803,000 bbl/day in February, compared with 505,000 bbl/day in late September, when the closures of Sunoco's Marcus Hook and Philadelphia refineries were first announced, according to the EIA.
“Regardless of the specific supply chains, supply lines will be longer to the northeast, and higher prices would be expected due to increased transportation costs alone,” the EIA report said.
In New York on Tuesday, the average retail gasoline price was $3.961/gal, while Pennsylvania was at $3.758/gal, compared with the national average of $3.716/gal, according to the automobile group AAA’s Fuel Gauge.
Gerard said Congress and the administration must act to help the northeast so “this disaster can be averted.”
Currently, closures of refineries supplying the east coast are driving up retail gasoline prices in the region, but are not having a ripple effect across the nation, said analyst Patrick DeHann with GasBuddy.com.
Company Location Capacity (bbl/day) Status Year Sunoco Marcus Hook, Pennsylvania 178,000 idle/for sale 2011 Sunoco Eagle Point, New Jersey 145,000 shut down 2010 ConocoPhillips Trainer, Pennsylvania 185,000 idle/for sale 2011 Hovensa St Croix, US Virgin Islands 350,000 shut down 2012 Western Refining Yorktown, Virginia 66,300 shut down 2010 2010 2011 2012 2013 Consumption 360,000 360,000 380,000 430,000 Supply 360,000 360,000 290,000 250,000 Surplus / Gap 0 0 -90,000 -180,000
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