A Pipeline Leak Is Doing Serious Damage To Oil Prices

Back to news Published 4 months ago Written By Esther Faludi
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Since yesterday, a leak in a central pipeline has resulted in the closure of a major gasoline carrier to the eastern United States. This disruption has already begun to drive up oil prices, and threatens to leave gas stations dry. Industry suppliers are now rushing to find other ways to deliver gasoline to the East Coast, while drivers have already noticed that the price of gas has gone up since yesterday. As local governments prepare to deal with the backlash over the coming days, Georgia and Alabama have already declared states of emergency.

The leak occurred in a section of the Colonial Pipeline, a major pipeline that supplies gas to approximately 50 million people in the eastern U.S. daily, says CNN. The line has been cut since yesterday, after the company detected a massive, 250,000 gallon spill in Shelby County, Alabama. The leak and closure have already led the industry to expect inconsistent gasoline deliveries in the coming week. One fuel distributer has cautioned its customers to place gasoline orders early and make an effort to save fuel, as gas may soon become both scarce and pricey. Meanwhile, the pipeline operator warns that customers should not expect full service to be restored before next week.

The industry has leaped to action in an effort to deal with this unexpected emergency. Since the closure, ships have been sent to deliver fuel from Texas to New York, and more tanker trucks are expected on the road than usual, carrying gasoline to affected areas. Unfortunately, even these solutions may raise the price of gas, as pipelines are far and away the cheapest way to transport gas or oil. And while these measures may help some areas, not all stations will have an adequate supply of gas. This scarcity may also drive prices upward.

For now, prices have risen only by one or two cents over the past week in Georgia, Tennessee, and South Carolina, reports CNN. However, Tom Kloza, chief oil analyst with the Oil Price Information Service, says East Coast residents should expect to see a 5 to 10 cent per gallon increase in pricing as this situation plays out. While the already affected states may also experience a short supply of gas, Kloza says that residents of Northeast markets like New Jersey may not feel the impact because they can source fuel from elsewhere.

Kloza likens the effect of this leak to “a mini hurricane,” while gas supplier Mansfield Oil says the situation should be treated “with the same importance and urgency as a natural disaster.” Perhaps the industry’s panic and quick response will be able to limit the effect on consumers. It’s just possible that industry players can work together to neutralize the issue, and get the pricing- and environmental impact- under control.

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