Philly gas stations likely to feel hurricane's ripple effects

Harvey
The roof of a gas station sits in flood waters in the wake of Hurricane Harvey on Saturday, Aug. 26, 2017, in Aransas Pass, Texas.

Though the Philadelphia area is home to four major oil refineries, motorists here are likely to pay more in the coming weeks for gasoline as national fuel markets reel from the impact of Hurricane Harvey.

The hurricane has knocked out about 15 percent of the nation’s refining capacity, which is concentrated along the Gulf Coast in Texas and Louisiana. Though Gulf Coast refiners are 1,300 miles from Philadelphia, they are connected to Northeastern U.S. markets by pipeline, so any disruption there will affect wholesale prices in Philadelphia.

“The ripple effect is that the East Coast, which is tied into the Gulf, could also see prices rise 10 to 20 cents a gallon over the next two weeks,” said Patrick DeHaan, a senior petroleum analyst for GasBuddy.

DeHaan and other analysts cautioned that the storm was still moving and that its impact was unresolved. Forecasts Monday had Harvey moving back out to sea before turning inland again near a concentration of refineries in Port Arthur, Texas, and Lake Charles, La.

“This is such a fluid situation,” said DeHaan. “One refinery is going down while another is coming back up, and the numbers are really changing.”

Gasoline futures traded Monday at a two-year high, providing refiners unaffected by the storm with an incentive to crank up production to full capacity. But the logistics systems to deliver fuels to markets may be disrupted and unsettled for a while until the storm passes and damage assessments are complete.

Northeast refineries along the Delaware River and in New Jersey supply only about 20 percent of the region’s fuel needs — much of the gasoline, diesel, and heating oil used here is delivered from Europe and Canada by sea and from the Gulf Coast by pipeline.

Philadelphia Energy Solutions, operator of a 330,000-barrel-a-day South Philadelphia refinery, said Monday it was diverting fuel to Florida and other Southeastern markets that are affected by supply disruptions from the Gulf Coast. It used the storm as an opportunity to remind policy makers that embattled East Coast refiners are critical to domestic energy security.

“In situations such as hurricanes or other events that impact fuel supply in the Gulf Coast, it becomes even more critical to have these independent East Coast refineries serve as suppliers for waterborne markets to the South in order to ensure that consumers are not negatively impacted by interruptions,” the company said in a statement.

Adam Gattuso, a spokesman for Monroe Energy, the Delta Air Lines-owned refinery in Trainer, Delaware County, also said the natural disaster was a reminder of the important role that Northeast refiners play in fuel diversity. “Without getting into specifics on our output, we stand ready to help out in any way we can,” he said.

Unlike gasoline markets, the price for natural gas has been relatively unaffected by the storm, reflecting the declining importance of Gulf Coast offshore natural gas production because of the shift to inland shale gas production areas such as Pennsylvania’s Marcellus Shale. After Hurricane Katrina in 2005, natural gas prices nearly doubled.

“While commodity prices have historically increased — especially natural gas — during tropical storms, that’s not really the case today, given the fact that the Appalachia Basin is meeting nearly 30 percent of the nation’s natural gas demands,” said David Spigelmyer, president of the Marcellus Shale Coalition.