Pipeline Shutdown Ripples Across Retail
By Samantha Oller on Sep. 19, 2016HELENA, Ala. -- The ripple effects of last week’s Colonial Pipeline spill in Alabama continue across the region.
National retail gasoline prices jumped 2.7 cents per gallon (CPG) over the past week to hit $2.21 per gallon as of Sept. 19, according to GasBuddy. The states most impacted by the pipeline outage saw the greatest week-over-week increases, led by Georgia at 22.5 CPG, Tennessee (13.8 CPG), South Carolina (13.0 CPG) and North Carolina (12.0 CPG).
With repairs to Line 1, the main gasoline pipeline feeding the East Coast, taking longer than anticipated, owner Colonial Pipeline Co. is planning to build a bypass around the leak site. It is also shipping gasoline on Line 2, which typically transports distillates. The Alpharetta, Ga.-based company is hoping to have Line 1 operational again sometime this week.
In the meantime, fuel consumers and retailers are dealing with an array of aftershocks from the shutdown of the pipeline. What follows are several of the biggest developments.
Fuel states of emergency
The governors of Alabama, Georgia, North Carolina, South Carolina and, most recently, Tennessee and Virginia have declared fuel states of emergency, which enable them to waive federal working-hour restrictions on fuel delivery-truck drivers serving areas supplied by the pipeline.
Steve Whatley, president of Whatley Oil, a distributor based in Cuthbert, Ga., told local newspaper the Ledger-Enquirer that its trucks are running at about 80%. While most of the gasoline in the Columbus, Ga., market come from a terminal fed by the Plantation pipeline, some of it is being diverted to cover shortages from the Colonial, Whatley said.
Retail price spikes
Retail averages have spiked across the states fed by the Colonial. Georgia’s average jumped more than 6 CPG overnight, AAA reported on Sunday, and was up more than 15 CPG week over week.
Patrick DeHaan, senior petroleum analyst for GasBuddy, told Reuters that retail prices were rising about one-tenth of 1 cent each hour and may not not return to typical seasonal averages for several weeks.
Fuel shortages
Some Atlanta gas stations are either completely out of fuel or selling it for a 20-CPG premium after having to tap out-of-market supply, the AP reported. One Kroger site in the area had traffic cones set up next to the fuel island, with the station completely out of fuel and unsure when it would get supply.
In the Knoxville, Tenn., market, about half of Weigel’s 64 sites ran out of gasoline. CEO Bill Weigel told the Knoxville News Sentinel that the Colonial pipeline supplies almost all of his business’ fuel.
“We’re having to haul fuel in from out of state,” Weigel told the newspaper. “We can only get a few loads at a time and it’s just not enough.” The Powell, Tenn.-based chain is having to ration fuel to supply the highest-demand areas.
“I’ve never faced anything like this in my life,” Weigel said. “We’ll get through it, though.”Meanwhile, in South Carolina, Mike Thornbrugh, spokesman of Tulsa, Okla.-based QuikTrip, which has a large presence in the Southeast, told local news station WYFF that several of the chain’s sites the state were dealing with outages. “When you have a pipeline of that magnitude go down, it just shows everybody unfortunately how fragile the system is and it doesn’t take much to cause some hiccups,” he told WYFF.
Panic buying
One issue feeding the outages is panic buying by consumers.
“The shortage appears greater because people are filling up more often,” DeHaan of GasBuddy told Reuters. “You are certain there is a shortage because there are lines at the station but on average they are only purchasing the quarter of a tank of gas instead of three-quarters.”
To head off greater panic buying in Tennessee, Patrick Sheehan, the director of the state’s emergency management agency (TEMA), released a statement urging calm:
“Tennessee’s consumers need to maintain their normal driving and fuel buying habits. If consumers fill up unnecessarily, top off their tanks when they aren’t close to empty and fill multiple containers at the pumps, then our petroleum retailers will not be able to keep up with the demand of the fuel supply.”
Scrambling for supply
Area retailers are trying to keep consumers informed, with some posting lists of sites that still have fuel available. On its Facebook page, Mapco provided a list of dozens of sites in Alabama, Arkansas, Georgia, Kentucky, Mississippi, Tennessee and Virginia that still offered regular, midgrade and/or premium gasoline.
In a statement, Emily LeRoy, executive director of the Tennessee Fuel and Convenience Store Association, said supply is tight but available in the Southeast.
“Wholesalers are bringing product into middle Tennessee from the pipeline in east Tennessee and the refinery in Memphis,” said LeRoy. “Further contingency plans are being made to haul fuel from refineries in Texas and Louisiana if heavy purchasing volumes continue.”
The bigger challenge is panic buying, LeRoy said. She told the story of one Tennessee retailer, who had an 8,500-gallon delivery that would typically last three days selling out in only six hours.
Unbranded under pressure
Unbranded retailers are feeling the supply crunch perhaps the hardest as refiners prioritize deliveries to branded terminals.
According to Bloomberg, Gulf Oil LP was selling unbranded gasoline at a terminal near Atlanta last Friday for 23 CPG higher than CITGO-branded fuel, citing data from Data Transmission Network.
“As wholesale marketers are facing uncertain supply, they will allocate by price,” Tim Columbus, general counsel for SIGMA, told Bloomberg. “When that happens, it is not at all unusual to watch unbranded prices escalate above branded prices. At the retail level, unbranded guys will do what they can to hang onto their share.”
East Coast increases
With the Colonial providing 40% of New York Harbor gasoline, the Northeast could also see price pressure.
In a blog post, Dan McTeague, petroleum analyst for GasBuddy, said prices have risen 12.3 CPG at the pipeline’s terminus in Linden, N.J., since the leak was announced. “The longer the pipeline remains idle, that price could double, although the operator believes, perhaps optimistically, the line could be flowing again by midweek,” said McTeague. “If not, look to that price rising once again by a similar amount.”