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Gas Prices, Shortage: Alabama’s Colonial Pipeline Suffers Another Setback

By David Cornell
Published on: 05:13 PST, Nov 1, 2016

Gas prices could be at their highest since 2008 soon due to another shortage. If you’re in the right age bracket, you probably remember when you couldn’t even fill up a sedan with less than $50 at the pump.

This time, the reason is all about safety and the possible prevention of other such instances. An explosion in the pipeline killed one Alabama worker and injured five others, which means another shortage is likely imminent. This gas shortage could affect more than just the Southeastern states, as the company effected is Colonial, a nationwide supplier of approximately one-third of all native fuel.

Today might be the best time to fill up the tank if you haven’t already, but be prepared to pay more than usual. As the rules of supply and demand indicate, when there is less of what you need, the company tends to raise the price to control the outflow. The explosion in Alabama is the second incident in a small time frame, the first of which was a spill in September that took around two weeks to clean up and stop.

Environmentalists might even take advantage of this incident to push for electric and hybrid vehicles, an alternative that would radically reduce carbon emissions. Clean air is always at risk as long as fuel-based automobiles continue to be the standard, though factories are still a major issue. The oil industry hopes that fuel remains the standard for as long as possible, although after this past week’s Alabama pipeline explosion, the risk appears to be getting worse.

Colonial has not estimated a time frame when the pipeline will be fixed and the risk minimized. The spill, which was the largest of its kind in about two decades, according to Reuters, already created a hike in gas prices as well as a shortage. It had supplied fuel to over 50 million Americans, according to Bloomberg. Gas stations across the South, mostly in Georgia, Alabama, Tennessee, and that area, had actually run out of fuel, causing many motorists to hunt for what was still available and hope it wasn’t riddled with air in the line.

The Colonial pipeline carries fuel from the refineries in Houston, Texas, to New York, and as of today, it has been shut down. As a result, many fuel suppliers are rushing to import from Europe, raising the price per barrel as high as $18 from refiners.

Freight charges have gone from $12.40 per metric ton to around $17. Combine this with the rise in refinery charges, and your next tank of gas could have you living on ramen for the month of November.

Robert Campbell of Energy Aspects Ltd. in New York stated in a note that the South will definitely not be the only states suffering this time.

“[Southern states are] highly dependent on pipeline supplies from Colonial, and, ultimately, Colonial flows form the baseline of U.S. East Coast supply. the more upward pressure will be placed on U.S. East Coast fuel prices, while downward pressure will be exerted on U.S. Gulf Coast product prices.”

The Colonial pipeline that exploded was part of a highly complex series, which workers had been laboring on, and the time estimate for repairs could easily be into late November. You might want to plan on a modest Thanksgiving at home if you haven’t filled up your tank yet.

[Featured Image by cowardlion/Shutterstock.com]

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