Harvey rattles fuel markets

Tropical Storm Harvey has pummeled the US Gulf Coast burying Houston and the surrounding area under several feet of rain and forcing the closure of nearly a quarter of US refining capacity

Parts of Texas have been hit by more than 50in of rainfall since Hurricane Harvey landed on 25 August, setting new records before it was downgraded to a tropical storm and, late on Wednesday, to a tropical depression.

The national average for a regular gallon of gasoline rose to $2.519 as of Friday morning, according to motorists advocacy group AAA, with even gaudier increases in the U.S. Southeast, which relies heavily on Gulf supplies. Its operator was forced to shut the main diesel line late Wednesday and planned to halt its gasoline line Thursday, meaning motorists from ME to Florida may soon see higher prices at the pump.

By volume, Colonial is the largest pipeline operator in the country, delivering more than 100 million gallons of refined products each day to markets between Houston and New York City, serving more than 50 million people. And on Thursday, the company shuttered Line 1, the pipeline that carries gasoline.

"Colonial's Lines 1 and 2 continue to operate from Lake Charles east. Deliveries will be intermittent and dependent on terminal and refinery supply".

Around the Triangle, gas prices were as high as $2.55 and AAA spokeswoman Sandra Horton said the price hike could affect families thinking about hitting the road for Labor Day weekend.

The effect will continue for several weeks, if not months, after Harvey hammered the Gulf Coast for several days, causing floods that buried Houston and the surrounding area in several feet of water.

The emergency waivers remove "requirements for reformulated gasoline and low volatility gasoline", according to the EPA.

In all the pipeline
Harvey rattles fuel markets

"Sourcing additional barrels from Europe is a potential solution, but an increased level of uncertainty is introduced surrounding the timeliness of delivery given the logistics of travel time and securing tankers", said Michael Tran, director of global energy strategy at RBC Capital Markets.

Now, gas originally meant for northern states can be sold in Florida and some still-open refineries can focus on making the one type of high-volatility gasoline.

Colonial Pipeline officials said 13 of the 26 refineries that supply gasoline to the pipelines are between Lake Charles, La., and Houston and were impacted by Harvey. Wending 5,500 miles, the Pipeline provides almost 40 percent of the gasoline to the South (from which most of Virginia's gas is received).

Overnight, retail gasoline prices surged in wide areas east of the Mississippi River. This sent cracks - the premium of the refined fuel over crude - higher in NY, while the storm also triggered a flurry of trans-Atlantic gasoline trading and disrupted exports of liquefied petroleum gas, causing prices to rise in Asia.

The Oklahoma-based company diverted gasoline deliveries in a similar way a year ago in metro Atlanta, where it has about 133 stores, after the Alabama pipeline spill. Additionally, two East Coast refineries have already run out of gasoline. Bloomberg reports that Valero Energy has stopped supplying gasoline stations that are not Valero-branded outlets.

Traders in Asia have also scrambled to buy oil products to ship to the United States and Latin America. Colonial is the second major fuel pipeline to close down in recent days.

Gas prices spiking in Tennessee; analysts point to Hurricane Harvey
The closure of key refineries and some of the pipeline's own resources by Hurricane Harvey facilitated the partial closure. Others charged well over $3, and one downtown Shell station charged $3.97 for a regular gallon of gas.

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