HAMPTON ROADS, Va. -- Some gasoline distribution terminals and gas stations from Virginia to Massachusetts are seeing shortages as the industry phases out gasoline additive methyl tertiary butyl ether (MTBE), the U.S. Energy Department (DOE) said on Thursday, according to Reuters.
The DOE has reported shortages at terminals near Richmond, Va., as well as the Tidewater area near Chesapeake Bay and Virginia Beach, which distribute gasoline to gas stations. Northern Virginia, Baltimore and Boston are also seeing shortages, the department's Office of Electricity [image-nocss] Delivery & Energy Reliability said.
The National Association of Convenience Stores (NACS) also said members had reported shortages at terminals around Wilmington, Delaware and Philadelphia.
The shortages are not because refiners are not making enough gasoline, or because of a recent rupture on the key Plantation Pipeline that carries supplies from the Gulf Coast to the East Coast, industry officials said. Rather, the oil industry is rapidly eliminating MTBE, banned in several states for polluting groundwater, and replacing it with ethanol, which can't be shipped by pipeline because it absorbs water.
"There's not a shortage of supply," said NACS spokesperson John Eichberger. "It's a transitional issue.
The American Petroleum Institute (API) said 40% of the gasoline produced in the United States by the first week of April was blended with ethanol, up from 33% a year ago.
The current gasoline price situation will get worse before it will get better. Motorists are likely to see increasing prices at the pump and brief and temporary outages during the next few weeks, Catherine L. Rossi, manager of public and government affairs for AAA Mid-Atlantic, said in a press statement. We caution drivers against hoarding or panic buying. If one gas station is out, the next one will have fuel. This is not a matter of inadequate supplies of gas; it is a matter of companies getting the ethanol, blending it with the gas and getting it to gas stations.
Stations have to drain, and clean their fuel storage tanks, AAA said, completely scrubbing them of any mineral deposits before they can receive the new ethanol-blended gasoline. Some stations contract this out to cleaning companies. A station will have to suspend the sale of gasoline during this time, and it may take a day or two for the station to be operational again. Similar inventory and equipment changes are also being performed at gasoline terminals, and with some tanker trucks. The overall effect of this change has been to slow down the delivery of new supply along the entire supply chain.
Ethanol cannot be transported by pipelines like MTBE-blended fuel; instead it must be mixed in at terminals and then transported by trains, trucks and barges. Many refineries were not readily equipped for this switch and are now making adjustments. The Northeast states are making this additive switch now; other areas such as California and the Midwest made the changeover earlier.
AAA added that the United States currently has the highest wholesale gasoline prices in the world. Speculation in the oil and gas futures commodities markets are fueling increases in wholesale prices. The price of crude oil stands at about $73 a barrel, a record high. Since the price of crude determines 59% of the price of gasoline, when the price of crude goes up, so does the price of gasoline.
And refinery capacity is also contributing to high gasoline prices, said AAA. U.S. refineries are at approximately 87% capacity, which is almost 4% lower than a year ago. Also, about 4% of U.S. refining remains down from Hurricanes Katrina and Rita. Refineries are also making the changeover from winter to more-costly-to-produce summer blends of gasoline.
Click here to read the Energy Information Administrations (EIA) This Week in Petroleum, which deals this week with both high prices and the MTBE phaseout.
Click here to read the EIAs Eliminating MTBE in Gasoline in 2006.
Click here to read the DOEs Energy Assurance Daily report.
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