Gasoline futures jumped the most in three months after an explosion and fire at the Philadelphia Energy Solutions oil refinery, the largest on the U.S. East Coast and a key supplier to the New York gasoline market.
The fire threatens to increase fuel prices from Delaware to Maine just as summer begins, which is normally a time of peak driving demand as Americans hit the road for vacation. Drivers have reaped the benefit of a steep drop in costs during May and June, with the nationwide average sinking more than 20 cents a gallon.
The blaze started after a leak in an alkylation unit triggered explosions, shutting a section of the refinery. The fire has been contained, Cherice Corley, a spokeswoman for PES, said in an emailed statement.
The PES complex, which comprises the Point Breeze and Girard Point plants, can process 335,000 barrels of crude a day. It’s the main supplier of fuel to the New York Harbor market, where inventories of gasoline are currently just below average seasonal levels. It sends fuel via pipeline and barge to New York and New England, as well as through pipelines to upstate New York and across Pennsylvania.
“This will mean a significant loss of gasoline production,” said Andy Lipow, president of Lipow Oil Associates in Houston. “There’s certainly going to be price increases from an initial shortfall.”
Gasoline futures for July delivery rose as much as 4.5 percent on the New York Mercantile Exchange and were trading 6.85 cents a gallon higher at $1.8548 a gallon at 9:34 a.m.
The Point Breeze section was already undergoing repairs following a fire in a pump that occurred earlier this month.
“Any shortage ahead of the peak of the summer driving season does not bode well for U.S. consumer pocketbooks,” Joe Brusuelas, Chief Economist at RSM US LLP, said on Twitter. “The video of the early morning explosion is horrific.”
The shortfall will be made up with inventory draws from the local region in the near term and imports longer-term, according to Lipow. Supplies on Colonial destined for other markets could be diverted into Pennsylvania, while it takes about 11 days for a tanker to reach the East Coast from Northwest Europe, he said.