Sandy’s impact on gasoline prices still in question

    Refineries across the region that supply the Northeast with refined petroleum products are taking stock of the damage caused by Hurricane Sandy. Philadelphia Energy Solutions, the former Sunoco plant in southwest Philadelphia, came through the storm unscathed, and workers are restoring the plant to normal operations. But Bloomberg is reporting flooding at the Phillips 66 refinery in Bayway, New Jersey. Power restoration at the plant may take up to 48 hours. The Hess refinery in Port Reading also remains closed.

    The Colonial pipeline, which carries gasoline, diesel fuel, jet fuel, and home heating oil up from the Gulf Coast refineries through Philadelphia to New York City is shut down. The pipeline itself is not damaged, but the end users are suffering power outages and cannot tap the line for products. Colonial spokesman Steve Baker says they’re in a holding pattern, waiting for the distributors in Philadelphia, South Jersey, and New York City to restore power.

    “[The pipeline] is full, but the liquids are not moving because of power shortages in northern New Jersey,” says Baker. Colonial has a supply tank farm in Woodbury, New Jersey, which Baker says has not suffered any damage.

    All of this disruption could result in higher gas prices, but with the heavily travelled areas between New York City and Philadelphia seeing such light traffic, the storm could have the opposite effect. Patrick DeHaan, a senior petroleum analyst with Gasbuddy.com, says it may be too soon to tell how the storm will impact prices at the pump.

    “We still don’t know how long it will take to get these facilities to get back online and operational,” says DeHaan. “That is a big question mark on what will happen with gas prices. If these facilities remain down for more than a week or two then there will likely be some sort of reaction in gasoline prices putting upward pressure at the pump.”

    DeHaan says power companies prioritize refineries, which typically are among the first to get power restored. Electronic trading today shows a drop in the spot price of gasoline, and if that continues, drivers are unlikely to see any immediate price spikes. DeHaan says the storm could result in a reduction in gasoline prices due to drivers staying off the roads resulting in a drop in demand.

    “So there are two distinct scenarios,” says DeHaan. “One, prices could actually fall as a result of the hurricane, as supply piles up. The other is that if refineries can’t make it back online quickly, that excess supply could be sucked up in the days ahead. So it’s important for refineries to get back online quickly.”

    PJM Interconnection, which runs the region’s power grid, reports that the overall transmission system is in “good shape.” But New Jersey was hit hard with transmission lines and substations out of service, including lines that run from New Jersey to New York.

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