Report says refinery closures may drive up US gasoline prices

Report says refinery closures may drive up US gasoline prices

28 February 2012 23:21  [Source: ICIS news]

A US refineryHOUSTON (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

Northeast ULSD Supply-Demand Balance and Projections - EIA (bbl/day)

 

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


By: Sheena Martin
+1 713 525 2653



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