Colonial Pipeline Will Temporarily Shutdown Due To Hurricane Harvey

Kristopher Drake
September 2, 2017

Harvey has shuttered about 23 percent of US refining capacity, potentially cutting fuel-making ability to the lowest level since 2008 and depriving the Colonial Pipeline of supplies.

The last time gas prices were this high was August 2015.

But that does little for the Colonial Pipeline, which depends on refineries further up the coast along the Texas-Louisiana border, an area that was dealing with catastrophic flooding mid-week.

GasBuddy analyst Patrick DeHaan says there's a squeeze on refineries that are up and running. That doesn't mean the entire pipeline network isn't operating, but it does mean that less fuel is going into the pipeline Tuesday. "A lot of them try to do the right thing when there's a natural disaster". It also now gets less than 5 percent of its electricity from wind and solar, according to the EIA.

The company asked suppliers and shippers to communicate when product is available to ship and when facilities will be capable of supplying product. Thirteen of the 26 refineries that feed the line are now offline. The pipeline company said that operations would only resume when it can "ensure that its facilities are safe to operate and refiners in Lake Charles and points east have the ability to move product to Colonial".

At least 20 tankers were booked to load European fuels for the USA since Harvey made landfall, a rate almost double the average for August, shipping data compiled by Bloomberg show. There are presently 13 refineries shut down or in the process of shutting down, including the nation's largest, Motiva Enterprises LLC's Port Arthur refinery. It should be noted, however, that many market watchers view the supply disruptions as temporary.

Exxon, meanwhile, also temporarily shuttered a massive plant in Baytown, Texas, with a capacity of more than 560,000 barrels per day, according to reports from CNBC.

The global impact of the storm was being felt in Venezuela, where financially strapped state-run PDVSA is facing the possibility that scheduled deliveries - tankers floating offshore for weeks due to non-payment - will make their way to other Latin American destinations. Oil production is also taking a hit.

The U.S. Department of Energy announced today that it would be tapping into the nation's oil reserves in the wake of the Harvey destruction. Already more than 15% of USA refinery capacity has shut down due to the torrential rains that Harvey has dumped across Texas.

Mexico, Brazil, Colombia and other countries want to tap some of the 7 million barrels of fuel sitting in the Caribbean sea, according to three traders and shippers.

Other reports by Ligue1talk

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