Gasoline futures shot up as much as 15% on Tuesday in intraday trading on the New York Mercantile Exchange after the accident on Monday involving Colonial Pipeline Co. The gains at one point on Tuesday were the biggest intraday move in eight years before narrowing and ending up 4.6%, at $1.4841 a gallon.
Colonial shut down its main gasoline and diesel pipelines after the incident Monday afternoon in Shelby County, Ala., about 35 miles south of Birmingham. It was the second major disruption on the 52-year-old pipeline in two months. Contract workers performing maintenance on the system using an excavating machine struck one of the lines, causing an explosion and fire that killed one person and injured several others.
The company said on Tuesday that the diesel pipeline resumed operations and that the gasoline line is scheduled to restart Saturday, though that could change. Colonial said it could work with shippers to send gasoline through the diesel line, which also ships jet fuel.
The 5,500-mile pipeline system carries more than 100 million gallons of fuel a day from Houston to New Jersey and serves 13 states in the South and on the East Coast.
In September, gas prices jumped in some parts of the Southeast after the company’s primary gasoline shipping route was partially shut after a leak in the pipeline just a few miles from the site of Monday’s explosion.
“It exposes the flaws of a just-in-time inventory system for a lifeblood product,” said Tom Kloza, global head of energy analysis at the Oil Price Information Service. He said fuel inventories in the Northeast have been replenished since Colonial’s September outage, but gasoline storage is fairly limited.
Refineries along the East Coast can’t produce enough fuel to meet demand in the populous region. As a result, the area depends on fuel produced along the Gulf Coast, where most U.S. refining capacity is concentrated, and from Europe and Canada.
Some energy observers have warned that outages could become more common because of the country’s aging energy infrastructure and public reluctance—for financial, political or environmental reasons—to build new pipelines. Protesters have clashed with police recently in North Dakota over the building of a nearly 1,200-mile-long oil pipeline.
The full impact of the explosion is unclear, and high prices haven’t filtered through to the pump, because many fuel stations haven’t needed to resupply and some fuel was still being delivered from the pipeline.
Meanwhile, some airports in the Southeast that count on Colonial to deliver some or all of their jet fuel, including Charlotte Douglas International, Baltimore-Washington International Thurgood Marshall and Hartsfield-Jackson Atlanta International, said they had sufficient supplies.
But some energy-market observers have expressed concern that with Colonial considering shipping gasoline over its diesel lines, jet-fuel deliveries could be limited.
The leak in the Colonial pipeline discovered in September caused a partial closure of the gasoline pipeline that lasted for 12 days. Gasoline prices jumped by more than 20 cents a gallon in a matter of days throughout Georgia and in parts of Tennessee and South Carolina. Atlanta filling stations experienced gasoline shortages.
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