Gasoline suppliers and schedulers were busy in front of the last weekend in August making preparations for a massive Hurricane Irene, with worry that the storm would trigger extended outages at regional refineries, pipelines and barge deliveries in the New York Harbor—the delivery location for the New York Mercantile Exchange RBOB gasoline futures contract.
Pipeline and terminal operators Colonial, Buckeye, Magellan and Nustar, as precautionary measures, all shut operations in the affected area over the weekend, with most of these returning to service by Monday (8/29) morning. Magellan continued to report that two of its three terminals shut in Connecticut remained closed Monday morning, while other operators noted that some terminals may remain closed due to power loss, road closures and flooding.
Refineries avoided damage, according to early Monday reports, although ConocoPhillips refinery in Bayway, N.J., remained shut. Also, trade sources are saying Sunoco’s Philadelphia and Marcus Hook refineries in Pennsylvania were running at reduced rates, estimating operations were cut by 25%.
Gasoline prices in spot trading early Monday were shallowly mixed across the U.S., but this follows a rally by the NYMEX futures contract to a three-week high on Friday (8/26) ahead of the storm. Meanwhile, higher wholesale gasoline costs through today will offset some of the lower costs that were moving through the supply chain.
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Previous studies by the Energy Information Administration (EIA) indicate that 50% of the price change in crude acquisition costs by refiners and spot oil prices will reach the retail outlet in two weeks, with 80% of the price change absorbed after four weeks. Higher costs in a lower trending market, which is what just happened now, will offset some of the decline before reaching the pump.
Meanwhile, vehicle miles driven in the U.S. in June were down a sharp 1.4% compared with June 2010, the most recent data available from the Federal Highway Administration shows. The lower VMT is further evidence showing gasoline demand down this year, which has been linked to high unemployment, climbing retail prices in the spring, and uncertainty over the U.S. economy.
Data out this morning did, however, show a 0.8% increase in consumer spending in July, the highest increase since February. This suggests we could be seeing a turnaround in what has been souring confidence by the American consumer.
For the Labor Day holiday, travel services company AAA sees overall travel down 2.4% from last year’s holiday. However, AAA does expect more road travel this weekend than last, as more travelers will switch from the air to the road; although the forecast was issued ahead of Hurricane Irene’s rampage through the Northeast.
About the Author
Brian L. Milne is the Refined Fuels Editor for Telvent DTN—a leading business-to-business provider of real-time commodity information services. Milne has been focused on the energy industry for 15 years as an analyst, journalist and editor. He can be reached at email@example.com.