US gasoline jumps most since 2008 as pipe blast boosts premium

Bloomberg

Gasoline in New York jumped the most in almost eight years, and its premium to crude prices soared 60 percent after an explosion and fire in Alabama shut the largest fuel pipeline in the US, killing one person and injuring more. Traders rushed to book cargoes from Europe.
December-delivery gasoline rose as much as 15 percent to the highest level for a front-month contract since June after Colonial Pipeline Co., which carries oil products to New York Harbor from the US refining center in Houston, shut mainlines on the pipe for the second time in two months.
The fuel’s premium to Brent crude, a theoretical profit margin for many refiners, jumped to as high as $18 a barrel.
The explosion, which killed one person and hospitalized five, occurred while contractors were working in an area that’s home to a “complex series of pipelines,” Shelby County Sheriff’s Office Major Ken Burchfield said by phone. Major fuel suppliers began notifying wholesalers in South Carolina late Monday of allocations. A spill in September closed the Colonial pipeline for 12 days, cutting supplies to 50 million Americans in the Southeast.
Gasoline traders responded immediately to the possible shortages, rushing to book extra tankers for replacement fuel supplies from Europe, according to two shipbrokers directly involved in the trade. Freight costs for cargoes across the Atlantic surged to the equivalent of about $17 per metric ton from about $12.40, according to data compiled by Bloomberg.
The southeastern US is “highly dependent on pipeline supplies from Colonial, and, ultimately, Colonial flows form the baseline of US East Coast supply,” Robert Campbell, head of oil products research at Energy Aspects Ltd. in New York, said in a note. The longer the mainlines are offline, “the more upward pressure will be placed on US East Coast fuel prices, while downward pressure will be exerted on US Gulf Coast product prices.”

RETAIL IMPACT
The pipeline’s outage in September triggered fuel shortages across the region, causing motorists in cities such as Nashville, Tennessee, and Raleigh, North Carolina to rush to stations to fill their tanks. The shutdown altered international trade flows for fuel deliveries and led to a federal waiver of gasoline-grade rules. The governor of Georgia issued an executive order to reiterate a state law that prevents price gouging.