Gulf Coast refiners cut output, adjust to shutdown of pipeline
Cyberattack that crippled gasoline delivery across the South also reverberates in Texas
Gulf Coast refiners are curtailing production and adjusting other operations in the wake of a ransomware attack that shut down the Colonial Pipeline and cut off nearly half the gasoline and diesel consumed on the East Coast.
The pipeline, which stretches from Texas to New York and carries nearly 3 million barrels of fuel a day, has been out since Friday, creating shortages and sparking panic buying that is leaving gasoline stations dry in Southeastern states. As a result, the average price of gasoline nationally is nearing $3 per gallon, according to the fuel tracking website GasBuddy.
Houston gasoline prices and supplies are unaffected, according to GasBuddy.
In a report, the research and analysis firm S&P Global Platts said refineries operated in Port Arthur by the French oil major Total and the Saudi company Motiva have cut production, as has the refinery in Lake Charles, La. operated by the Houston refiner Citgo. S&P said it could not estimate the amount of the output cuts.
Total and Motiva did not respond to requests for comment. Citgo, the U.S. subsidiary of the Venezuelan national oil company PDVSA, confirmed it has curtailed production at Lake Charles, but declined to provide details.
Citgo said operations at its Corpus Christi refinery are unaf
fected by the pipeline shutdown.
Refiners, including Citgo, are seeking other ways to get their products to East Coast markets, such as by truck or ship. Exxon Mobil, which has refineries in Baytown and Beaumont, said it is operating normally and working with its distributors and wholesalers to move fuels to the East Coast.
“Efforts are underway to quickly transport refined products from unaffected regions to communities and customers in the most severely impacted markets,” a spokesman said.
Marathon Petroleum, which operates a refining complex in Texas City, said it has not curtailed output, but is working with customers and business partners to transport fuels east if the Colonial pipeline remains shut for a long time. If necessary, the company will rely on its network of pipelines, terminals, trucks, rail and marine transportation, a spokesman said.
If the Colonial Pipeline returns to service over the next few days, the effects will be short-lived, analysts said. If the shutdown drags on, that could lead to more severe disruptions, shortages and price increases.
East Coast refineries have only about a week’s worth of stocks on which they can draw, analysts said.
The Biden administration has increased the maximum driving time of truck drivers from 11 hours per day to 14 in an effort to get gasoline to areas affected by the pipeline outage. The largest trucks, however, carry only about 9,000 gallons of fuel, making tanker vessels a better option.
Going the maritime route is complicated by a U.S. law that requires products shipped between U.S. ports to be carried by American ships with American crews. U.S. ships are few, and costlier than foreign-flagged vessels.
Oil traders, meanwhile, are chartering more ships to carry refined products from northwest Europe to terminals located near New York City or other major product distribution hubs.
“If the outage is over tomorrow, we kind of shrug and the industry gets over it,” said Richard Joswick, head of global oil analytics at S&P Global Platts. “If the outage goes more than a week, then it’s a real problem.”