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Hurricane Sandy Shuts Down Oil Refineries

October 30, 2012


As hurricane Sandy trails the Northeastern coast, several oil refineries have been forced to shut down in advance. In total, three of the major six refineries located in the NE have effectively shut down operations, including Phillips 66 in Linden, New Jersey, the second largest refinery in the area. The major ports that serve to supply the area with about one million barrels of fuel per day were temporarily closed down as well. One major concern is the expected fall in oil and gas demand. With power lines down and power outages throughout many cities, demand could dramatically fall for days. Chief oil analyst at Oil Price Information Services Tom Kloza predicts that the drop could be as significant as the Katrina caused.

On the other hand, prices could rise if there is severe refinery damage or long-term shutdowns extend longer than the power outages last. Philadelphia Energy Solutions refinery is running some units only at minimum safe operating levels. Most other refineries are operating at minimum capacity. If damage is limited, many experts expect fuel supplies to be regular within a few days. According to AAA, gas prices at the pump fell nationally half a penny from Sunday. Further, Natural gas prices and heating oil rose. Crude oil prices fell $1 per barrel in trading on the New York Mercantile Exchange.

John Auers, senior vice president and refining specialist at Turner, Mason & Co. in Dallas explains that “markets have already bumped up prices to some degree. If there’s no major catastrophes then prices are going to go in the other direction.”

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