By Chunzi Xu (Bloomberg) —
New York and much of the East Coast are at risk of a gasoline shortage this summer as the European Union’s ban of Russian fuel threatens to choke off the backup supplies the US relies on during peak driving season.
Seasonal gasoline stockpiles already are at the lowest in about a decade, and heavy winter maintenance at refineries may further trim inventories. The EU ban on Russian oil-product imports starting Feb. 5 will strain the region’s feedstock supplies, limiting how much gasoline the bloc can make for itself or the US East Coast, which increasingly relies on transatlantic imports in the summer.
The price spike that would accompany such supply shocks threatens to burden consumers still stinging from last summer’s $5-a-gallon gas. Resurgent pump prices also would pose challenges for President Joe Biden, who has made a priority of capping fuel costs and uses prices as a cudgel against political rivals.
To prevent New York and the rest of the East Coast from running out of fuel, suppliers will need to get creative. Although the US is a net exporter of gasoline, most of the excess is in the Gulf Coast, and transportation to the East Coast is constrained by insufficient pipeline capacity and the expense of waterborne shipping.
Suppliers could move fuel from the Gulf Coast into storage and blending facilities in the Caribbean, such as in the Bahamas, and then export from there to the East Coast, according to Energy Aspects, a London-based consultancy. The US also may draw more supply from Asia and the Middle East, but the lengthy journey and high shipping costs mean that option isn’t likely to provide quick or significant relief at the pump.
–With assistance from Barbara Powell.
© 2023 Bloomberg L.P.
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