EIA Warns Of Diesel Price Spike With Sunoco Philadelphia Refinery Closure
Published February 27, 2012
Dow Jones Newswires
foxbusiness.com
NEW YORK – Prices of ultra-low-sulfur diesel fuel -- already at record highs for this time of year -- could spike higher if Sunoco Inc. (SUN) goes ahead with plans to shut its 335,000-barrels-a-day Philadelphia refinery in July if no buyer is found, U.S. government forecasters warned in a report Monday.
The plant made up 24% of the refining capacity on the densely populated East Coast as of August, the Energy Information Administration said. Since September, ConocoPhillips (COP) shut its 185,000-barrels-a-day Trainer, Pa., refinery and Sunoco shuttered its 178,000-barrels-a-day Marcus Hook, Pa., refinery. Those refineries, plus the Sunoco Philadelphia plant, make up 50% of East Coast refining capacity.
Additionally, Hovensa SA, a 350,000 barrels-a-day joint venture refinery operated by Hess Corp. (HES) and Venezuela's state owned Petroleos de Venezuela, which supplied refined products to the East Coast, was shut last week...
...EIA said the Colonial Pipeline, which moves more than 500,000 barrels a day of gasoline and distillate fuel (diesel and heating oil), from the Gulf Coast refining belt to the New York Harbor region, is running near capacity and could boost supply to the Northeast this summer by no more than 100,000 barrels a day. That is "well less than the expected production shortfall if the Sunoco Philadelphia refinery is closed."
"The largest logistical hurdle is the lack of terminal and pipeline connections to move products from waterbourne vessels into the product distribution system that current supplies areas through Pennsylvania and western New York," the EIA said. Ports serving the Philadelphia-area refineries and tanks are configured to handle crude oil, not products, although conversion work is underway at an area plant that was closed in 2010. But even those changes would be inadequate to replace the supply from the three Philadelphia refineries.
EIA said capacity to move products into these regions by rail is limited and cost of trucking oil from New York Harbor to Pittsburgh could add at least 20-30 cents a gallon to costs...
..."Imports of ULSD are not expected to increase," because foreign sources of the fuel are limited, as not many countries require its use. Europe, which uses the fuel, is a net importer.
The Gulf Coast is the most likely source of additional supply, but faced pipeline capacity constraints and a requirement to use Jones Act tankers "which may be in short supply..." |
