The U.S. petroleum industry is incredibly complex. Crude oil comes from both domestic sources and imports and goes through refineries and terminals before it is dispensed as fuel at your local fueling station. Pipelines are critical to this process — they deliver the majority of crude oil to refineries in the country and also transport most of the refined product from refineries to local markets.
The U.S. Energy Information Administration has developed the U.S. Energy Mapping System to provide context to the country’s vast distribution system. Users can locate all elements of the U.S. energy infrastructure, including wells, power plants, terminals and other storage facilities, refineries and, of course, pipelines.
Overall, there are more than 200,000 miles of crude oil and refined product pipeline in the United States—and none is more important than the Colonial Pipeline, which supplies much of the gasoline and diesel fuel used on the Eastern Seaboard. When there are problems with the Colonial, the entire region is affected, but timing and other factors can play a big role in how much of an impact is ultimately felt. Two outages in 2016 demonstrate how timing can determine the severity of any outages.
The Colonial Pipeline is a 5,500-mile system of pipelines that connects 29 refineries and 267 distribution terminals from Houston to New York Harbor (Linden, NJ). Every day, it carries about 2.6 million barrels of refined product to the Southeast and the East Coast. With total U.S. fuel demand at around 19.7 million barrels/day, that means that the Colonial Pipeline transports 13% of all of the fuel used in the country on a daily basis.
The pipeline is not a single pipeline but a series of four large pipelines and a number of smaller connecting pipelines. Along the way there are multiple points at which product is offloaded or diverted. These four pipelines meet in Greensboro, NC.
- Line 1 (Houston to Greensboro): Moves gasoline only (1.4 million barrels/day capacity)
- Line 2 (Houston to Greensboro): Moves refined products like distillate or gasoline (1.2 million barrels/day capacity)
- Line 3 (Greensboro to Linden, NJ): Moves 900,000 barrels/day of refined products
- Line 4 (Greensboro to Dorsey Junction, MD): Moves 900,000 barrels/day of refined products
The Eastern Seaboard states from Florida to Maine consumer about 5 million barrels/day of fuel and 3.2 million of these barrels are gasoline. Overall, the Colonial Pipeline carries about half of all the fuel used in the Southeast and East Coast.
There are a few reasons for this dependence upon the Colonial Pipeline.
First, there is limited refining capacity in the Northeast. Northeast refineries only produce about 65,000 barrels/day of gasoline. It is even worse in the Southeast: There are no significant refineries between Alabama and Pennsylvania.
Second, the Jones Act places constraints on the amount of fuel that can be delivered via barge from the Gulf Coast to the Eastern Seaboard. The Jones Act requires that all cargo ships that travel from one U.S. port to another must be U.S. owned and operated. The requirements of the Jones Act can make it more expensive — and more difficult — to ship fuel from the Gulf Coast to the East Coast.
In 2016, the Colonial Pipeline faced two outages, both to Line 1 that carries gasoline from Houston to Greensboro.
Beginning September 9, a 12-day disruption led to significantly higher gas prices, particularly in the Atlanta area. A second 6-day outage that began on October 31 had a minimal effect on gas prices.
There several main reasons that the two outages had significantly different effects on prices.
- Timing: The September outage occurred at a time when inventories were low because of the seasonal transition from summer- to winter-blend fuels. On the East Coast, this transition to new fuel blends is completed on September 15. In the weeks leading up to this transition, inventories of summer-blend fuels are reduced and any supply disruptions are magnified.
- Duration: The outage that began September 9 was twice as long as the second outage.
- Demand: Demand for fuel typically peaks in the summer months and declines for the rest of the year.
For each of the two outages, there also were a number of ways that the overall fuel supply system reacted to mitigate impact of loss of Line 1:
- Line 2 product mix: The product mix for Line 2 of the Colonial Pipeline was modified to carry more gasoline. However, because the line runs at our near capacity, that meant that other refined product was displaced.
- Plantation Pipeline product mix: The Plantation Pipeline, which transports 700,000 barrels/day from the Gulf Coast to the Washington, DC, area carried a higher mix of gasoline. However, like changes to Line 2 of the Colonial Pipeline, an increase of gasoline product in the pipeline meant that other refined products had reduced deliveries.
- Cargo ships: Cargo ships that were en route to deliver refined product overseas were diverted mid-journey back to U.S. harbors. This helped mitigate supply outages in markets near deep water ports but did not help out much at inland markets, such as Atlanta.
- Trucking: Transporting fuel by truck is not the most cost efficient mode of transport. However, when outages occur and wholesale prices increase, long-distance trucking becomes a viable alternative. In addition, regulations that dictate the use of specific fuel blends in different metropolitan markets were waived so that product could move more easily, especially to inland markets.
Even with these adjustments, it still takes time for the system to recover from any disruptions. Product travels very slowly through pipelines — at a speed of 3 to 5 miles per hour, or walking pace. On average, it takes about 18 days for fuel to travel from Houston to New York City.