| NEW YORK, Sept 21
NEW YORK, Sept 21 Drivers from Tennessee and
Georgia to New Jersey may soon breathe a collective sigh of
relief as service is restored on Colonial Pipeline, cutting
gasoline prices that have surged following a leak on the key
Still, the 12-day disruption on Colonial, the main artery
that flows about 1.3 million barrels per day of fuel from the
refining hub on the Gulf Coast to cities all the way up to the
East Coast illustrates the impact even a relatively brief
disruption can have on gasoline prices.
The largest gasoline conduit in the United States was
partially shut down after a leak was discovered on Sept. 9 in
Alabama, and motorists have since suffered long waits to fill up
at stations across the southeast. The line was scheduled to
restart Wednesday evening, the company said.
As U.S. benchmark gasoline futures spiked nearly as
much as 10 percent on the supply disruption, prices at the pump
jumped in Alabama, Georgia, and Tennessee, where states of
emergency were declared in the wake of the fuel line's rupture.
In Georgia, for example, gasoline rose by more than 30 cents
a gallon in the wake of the leak, according to motorist advocacy
"When you're very dependent upon one source and that source
has problems, it can lend itself to supply problems," said John
Mays, director of special studies for Turner Mason & Co, a
Dallas-based consultancy. "Colonial has been a very reliable
source - it is such an unusual event for Colonial to have
downtime like this."
Over the past two decades, Colonial has had only one other
major spill, according to federal pipeline safety records.
In that time, however, the East Coast has become
increasingly dependent upon that line as oil companies have
shuttered refineries in New Jersey, Pennsylvania, Virginia, St.
Croix and Aruba, cutting off over 800,000 bpd of refining
capacity that previously served the region, providing
alternative gasoline supplies.
Colonial is now responsible for supplying about a third of
the 3.2 million bpd of gasoline consumed on the East Coast,
according to data from the U.S. Energy Department.
Gasoline is also imported to the U.S. eastern seaboard from
Europe and Canada, which accounts for an additional 600,000 bpd
of fuel. The five refineries that still operate in the region
can produce a total of about 700,000 bpd of gasoline. Other
pipelines and domestic shipments account for the rest of the
When Colonial is disrupted, major ports with significant
gasoline storage, like New York Harbor may initially be
insulated from jolts in prices that affect other areas. Refined
products in storage in New York Harbor can be released by
suppliers, as additional gasoline is sought from Europe and
The reliance on Colonial is also related to cost.
Transporting fuel from Gulf Coast refineries by ship can be
prohibitively expensive, because domestic shipments must be made
on tankers that are built in the U.S. and meet other costly
requirements under the Jones Act.
Refining oil in Europe and transporting the products can
also cost more because generally European refineries are less
efficient than Gulf Coast plants.
"Colonial is a large part of the infrastructure mix - it is
the most cost-effective way to get gasoline from a major
refining center to a major consumption center," said Skip York,
a consultant with Wood MacKenzie in Houston.
Pipeline construction in the United States has become
controversial. Natural gas pipelines proposed to run from the
Marcellus shale in Pennsylvania have met with vitriolic
opposition, and crude oil pipeline proposals, including Keystone
XL and most recently, the Dakota Access pipeline, have been
Alternative gasoline pipelines to the East Coast have not
been proposed in recent years, due to the combination of
Colonial's efficiency and the difficulty of building new
"It's the penalty of success that Colonial has been able to
build up so much capacity," said Turner Mason's Mays.
(Reporting By Jessica Resnick-Ault; Additonal reporting by
Devika Krishna Kumar; Editing by Marguerita Choy)