How quick action by Colonial and the entire downstream sector made one of the largest cyberattacks on energy infrastructure a short-lived event.
As we discussed last week, the Colonial Pipeline outage sent both the media and public into a state of panic and hysteria. While there was good reason to be concerned about the impact of a potential protracted pipeline outage and the impact on fuel supply for a very distinct portion of the U.S. refined fuels market serviced by the pipeline, the communication and coverage of the events sparked a massive panic buying event that unnecessarily caused retail fuel station outages around the country and exacerbated the problem. Today, as we did last week, we hope to offer insights using our real-time Refined Fuels Demand data to ease fears and to update the market on the downstream sector’s efforts to restock both wholesale and retail supplies following Colonial restarting operations on May 12.
A Regional Update
Looking at the entire PADD1 or East Coast market, we can see that gasoline liftings from wholesale terminals in the region peaked on May 12 – the same day that Colonial began restarting pipeline operations. This is exactly what should be expected amid a resumption of pipeline supply and expectations of restocking the wholesale terminals that had been depleted during the panic buying and pipeline outage.
In PADD1 A (New England), which was spared from the retail fuel outages seen further south along the Atlantic Coast, gasoline liftings are now at normal pre-pipeline outage levels following the spike in demand at loading terminals last week as truckers worked to ship product south to areas in PADD1 B and PADD1 C that were experiencing shortages.
PADD1 B (Central Atlantic) gasoline liftings from the wholesale terminals have also normalized this week. After volumes jumped to their highest in our records early last week as shippers worked to truck fuel to PADD1 C, just as we saw in PADD1 A, liftings peaked on May 12 as the Colonial Pipeline restarted. While gasoline demand at the terminals remained elevated through the second half of last week, this week demand has returned to normal pre-pipeline outage levels.
The impact of resumed flows on the Colonial Pipeline as well as the trucked volumes of fuel from further north along the Atlantic Coast can be seen clearly in the PADD1 C (Lower Atlantic) data. Aggregate gasoline liftings in the region fell 25% week-on-week at the very peak of the shortage but recovered through the second half of last week. Notably, Sunday liftings—which are normally 20-25% lower than weekday volumes, as many truckers have the day off—only fell 10% on Sunday May 16, as truckers in the region worked overtime to restock retail stations. Currently, gasoline liftings in PADD1 C are on the rise and are just 4% below pre-pipeline outage levels, signaling that wholesale terminals in the region are largely resupplied.
A State-by-State Look
While the aggregate PADD-level demand data shows that supply is normalizing within the region as a whole, a city-by-city look within each state shows that there are still supply availability issues at localized levels. In general, the cities with waterborne import access, the largest storage capacity, and/or closest proximity to the pipeline are working to restock neighboring areas that still have depleted inventories.
In Norfolk, where gasoline usually trades at a premium to Richmond, this premium narrowed sharply from roughly 6.5 cents per gallon prior to the pipeline outage to just 3.2 cents as of May 19. Norfolk is further along the smaller pipeline stub that runs east from Mitchell, Virginia. However, Norfolk also has port access which—according to ClipperData—allowed for waterborne RBOB imports amid the pipeline outage.
This narrowing premium in the Norfolk market reflects both waterborne import market access and Richmond gasoline being bid up on tight supply. While gasoline liftings out of Norfolk are now down 13% from their peak on May 15, they are still elevated at levels last seen during the peak of summer demand season in 2019.
Meanwhile, although on the rise this week, gasoline liftings from wholesale terminals in Richmond are still down 17% from their pre-pipeline outage level.
In the Macon market, gasoline was trading at its largest premium to Atlanta in years moving through April, but then began to narrow sharply in early May. However, with the pipeline outage decelerating flows down the stub line to Macon, the gasoline premium in Macon shot higher once more – rising from 2 to 4.5 cents per gallon. The return of pipeline flows on May 12 marked the peak of the Macon-Atlanta premium. However, the Macon premium has not returned to pre-pipeline outage levels and signals continued tightness in the Macon market at this time.
Atlanta gasoline liftings from wholesale terminals shot higher last week, peaking on May 14 – two days after the pipeline resumed operation. However, signs of the pull on wholesale storage in Atlanta resumed midweek, as gasoline liftings are back up near their May 14 high. The increase in liftings signals pipeline supply is reaching Atlanta and the efforts to refill retail stations in the region as well as further outside of the normal Atlanta distribution area.
Macon gasoline liftings from wholesale terminals reflect the exact dynamic we see playing out in the Macon-Atlanta gasoline price spread. Although gasoline lifting volumes normalized on May 14, they dropped sharply once more moving into the weekend, and remain weak moving through this week. This signals that supply at wholesale terminals in Macon remains constrained despite the main Colonial lines resuming operations.
The relatively well-stocked Charleston market had gasoline liftings from wholesale terminals surge amid the pipeline outage, as pipeline deliveries to the Augusta market plummeted and shippers worked to truck gasoline out of storage in Charleston. Charleston, like Norfolk, also has port access allowing for waterborne gasoline deliveries, which ClipperData reports also saw a surge of imports in recent days amid the pipeline outage. This can be witnessed in the Charleston-North Augusta gasoline price spread which fell from a 7 cent per gallon premium prior to the pipeline outage to a 3.9 cent per gallon premium amid the depths of the outage on May 12. After the pipeline restarted, the premium in Charleston shot back up to nearly 8 cents per gallon and currently holds just below this level.
Charleston gasoline liftings from wholesale terminals surged to a record high at more than double their normal levels, as markets like North Augusta drew from storage in Charleston and fuel was trucked across the state and region. Gasoline demand at Charleston terminals peaked on May 12 as pipeline operations resumed and are now back to pre-pipeline outage levels.
North Augusta saw gasoline liftings from wholesale terminals continue to fall through May 14, signaling that pipeline flows had not yet returned to normal at the delivery point. However, this week we can see pipeline deliveries are working back toward normal levels as North Augusta gasoline liftings from wholesale terminals are now up 120% from their lows. Still, it is clear that supplies in the region have not completely returned to normal levels as North Augusta gasoline liftings remain 21% below their pre-pipeline outage levels.
Unleaded gasoline in Raleigh saw its 1.5 cent per gallon premium to Charlotte flip to a near 1 cent discount amid the pipeline outage. The Raleigh-Charlotte gasoline price spread worked back toward parity through late last week and is now essentially flat as wholesale terminals in both Raleigh and Charlotte are increasingly resupplied.
Gasoline liftings from wholesale terminals in Raleigh plummeted to a near complete halt on May 12 amid the depletion of supply. However, liftings from Raleigh began to surge on May 13, just one day after the pipeline resumed operations. Raleigh gasoline liftings hit their highest in our records on May 15, peaking at 27% above their pre-pipeline outage highs.
Charlotte gasoline liftings initially bounced higher on May 12 but ultimately plummeted 50% from pre-pipeline outage levels, bottoming on May 14. Charlotte liftings began to surge higher from May 15, peaking at a near record high on May 17. As of midweek, gasoline demand at wholesale terminals in Charlotte is still elevated compared to pre-pipeline outage levels as suppliers continue to work to restock retail fuel stations.
As we discussed last week, some cities in states like Alabama, Louisiana, Mississippi, Florida, and Tennessee also experienced retail station shortages. For states like Mississippi, Alabama, and Florida, their proximity to refineries in Texas and Louisiana have allowed for some long-haul truck deliveries to help mitigate the retail shortages. Gasoline liftings from wholesale terminals in the PADD3 (Gulf Coast) region rose to their highest since the pre-COVID-19 lockdown restrictions in March of last year and peaked on May 12 as the pipeline resumed operation. Gasoline liftings in PADD3 are now down below pre-pipeline outage levels, which not only indicates that the long-haul trucking deliveries are declining in the region but also that panic buying within the region pulled demand forward and retail stations are seeing demand weakness this week.
In PADD2 (Midwest) which includes Tennessee, we can see a phenomenon similar to what took place in PADD3. Gasoline liftings from wholesale terminals jumped to their highest since the pre-COVID-19 lockdown directive panic in March 2020. Demand peaked on May 12 but held near this extremely high level through May 14 before moving sharply lower into the weekend. This not only reflects restocking of retail fuel stations across the Midwest that saw panic buying (despite most of the states not being affected by the outage) but also reflects an effort to move fuel from states like Illinois and Kentucky to Tennessee. Demand at terminals in the region has now returned to normal pre-pipeline outage levels.
While some degree of retail fuel station outages persist in nearly all the affected states, it is clear that the industry is on track to resupply these remaining stations in fairly short order. According to GasBuddy, there are now roughly 8,700 retail fuel stations nationally without supply. The figure is dropping rapidly, now down nearly 50% from its peak last week. Many of the remaining supply outages are likely impacting smaller retail stations that lack contractual agreements and aren’t as logistically sophisticated as larger fuel retailers.
Given that panic buying led many individuals to fill up their vehicles or spare gas cans when it was not needed, retail fuel demand is plummeting this week. As this pulled forward demand for the millions of individuals who unnecessarily panic bought, it now means that they will not need to fill up for some time and in a perverse way is helping with the rapid restocking efforts this week. Most importantly for end users of fuel, even in the most impacted areas from the pipeline outage and panic buying, the data now clearly says that if you’re willing to hunt around a bit, fuel is available somewhere nearby. As we said last week, this fuel shortage was more akin to the great toilet paper shortage of 2020 than the oil embargo of 1973.