Since making recent headlines, many people are familiar with the Philadelphia Energy Solution (PES) oil refinery explosion that occurred on Friday, June 21st at approximately 4:00 a.m. in South Philadelphia. The blaze injured five workers that were treated for minor injuries. The explosion caused a 3.5% – 3.9% jump in RBOB prices on the NYMEX due to concern that the outage may constrain supply.
PES refinery has the capacity to process 335,000 barrels a day. With this refinery being out of commission for an indefinite amount of time, it has the potential to drastically affect the East Coast gasoline supply. This will most likely cause prices to increase to a point where supply from Europe and other parts of the United States will become more enticing to make up for this lost inventory.
Currently, East Coast gasoline inventories are in line with the five-year average of about 62 million barrels which gives a little bit of slack in the supply. “We’ll have to see an extended period of downtime, like a month or two, then we’ll see a noticeable rise in gas prices.” said Patrick DeHaan, head of petroleum analysis at Gasbuddy.com. Europe has gasoline supplies that can fill the gap, however, it can take ten days to two weeks for larger volumes to be shipped to the East Coast. There is also the option to increase the volume shipped from the Gulf Coast through the Colonial Pipeline to pick up some of the slack from the PES outage as well.
There is still no report on the full extent of the damages or the downtime it will require to fix them. As for knowing how much of an increase gas prices are projected to be, it all depends on the reports we get on damages from the assessments and PES representatives.