Gasoline Surges as Fire Rips Through Philadelphia Refinery

By David Marino | June 21, 2019

Gasoline futures jumped the most in three months after an explosion and fire at the Philadelphia Energy Solutions oil refinery, the largest on the U.S. East Coast and a key supplier to the New York gasoline market.

The fire threatens to increase fuel prices from Delaware to Maine just as summer begins, which is normally a time of peak driving demand as Americans hit the road for vacation. Drivers have reaped the benefit of a steep drop in costs during May and June, with the nationwide average sinking more than 20 cents a gallon.

The blaze started after a leak in an alkylation unit triggered explosions, shutting down the Girard Point section of the refinery, according to people familiar with the plant’s operations. The fire has been contained, Cherice Corley, a spokeswoman for PES, said in an emailed statement. All employees were accounted for and there were no significant injuries.

The PES complex, which comprises the Point Breeze and Girard Point plants, can process 335,000 barrels of crude a day. It’s the main supplier of fuel to the New York Harbor market, where inventories of gasoline are currently just below average seasonal levels. It sends fuel via pipeline and barge to New York and New England, as well as through pipelines to upstate New York and across Pennsylvania.

“This will mean a significant loss of gasoline production, said Andy Lipow, president of Lipow Oil Associates in Houston. “There’s certainly going to be price increases from an initial shortfall.”

Because it’s a chemical fire, it could burn as long as all day, said Jim Smith, a supervisor with the Philadelphia Fire Department. He described the event as a three-alarm blaze, adding that 50 units are fighting the fire. No injuries were reported.

Gasoline futures for July delivery rose as much as 4.5% on the New York Mercantile Exchange and were trading 6.85 cents a gallon higher at $1.8548 a gallon at 9:34 a.m.

The Point Breeze section was already undergoing repairs following a fire in a pump that occurred earlier this month.

“Any shortage ahead of the peak of the summer driving season does not bode well for U.S. consumer pocketbooks,” Joe Brusuelas, Chief Economist at RSM US LLP, said on Twitter. “The video of the early morning explosion is horrific.”

Due to a smoke plume, residents and businesses in the area had been asked to stay in their homes out of precaution, the City of Philadelphia Office of Emergency Management said in a tweet. The shelter-in-place request was subsequently lifted for portions of South Philadelphia, it said.

There have been refining operations for 150 years at the site, which has passed through a series of owners, including Chevron Corp. and Sunoco before being consolidated into Philadelphia Energy Solutions, a partnership formed between The Carlyle Group and Energy Transfer Partners’ Sunoco.

The shortfall will be made up with inventory draws from the local region in the near term and imports longer-term, according to Lipow. Supplies on Colonial destined for other markets could be diverted into the Pennsylvania, while it takes about 11 days for a tanker to reach the East Coast from Northwest Europe, he said.

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