Hurricane Irma prompts high gasoline demand as it disrupts Florida’s supply chain

By Published On: September 14, 2017Categories: Alerts

Hurricane Irma has created several issues with gasoline markets in Florida, both by prompting increased demand and disrupting the supply chain needed to deliver gasoline. Hurricane Irma made landfall in South Florida on September 10 and proceeded on a northwesterly path up the length of the state. Because of the evacuation of people in anticipation of Hurricane Irma, demand for transportation fuels and the logistical challenges in supplying Florida began before it made landfall. As Hurricane Irma approached, shipping traffic was diverted and ports closed, stopping the flow of petroleum products into Florida. People filling their gasoline tanks in anticipation of the storm resulted in a rapid increase in demand. In Hurricane Irma’s aftermath, demand is slowly returning to normal levels, allowing time for resupply to arrive and supply chains to adjust.

There are no refineries in Florida or pipelines connecting Florida to supply centers along the U.S. Gulf Coast or any other state. Therefore, unlike most other parts of the country, Florida is almost entirely supplied by marine movements of petroleum products from domestic and international sources.

Resupply of gasoline will arrive through several large ports located along Florida’s coastline, each transporting fuel to nearby markets via truck and short-distance pipeline. Terminals within the Port of Tampa supply much of the state’s west coast. South Florida is supplied via terminals in Port Everglades, just north of Fort Lauderdale. Central Florida is supplied via pipeline from Tampa and Port Canaveral on the Atlantic Coast. Northeastern Florida is supplied by terminals in the Port of Jacksonville. The only product supplied to Florida through a pipeline is sourced from a terminal in Bainbridge, Georgia that is connected to the Colonial Pipeline system and supplies the Florida panhandle by long-distance tanker truck. The rest of western Florida is supplied via truck and barge movements via the Intracoastal Waterway from nearby refineries in Alabama and Mississippi (Map – Product Supply – Florida (PADD 1C)).

Gasoline consumption in Florida averaged 493,000 barrels per day (b/d) in 2016, representing 5% of total U.S. consumption. Over the past five years, Florida’s monthly gasoline consumption ranged from 428,000 b/d to 538,000 b/d. Hurricanes alter these typical and planned-for demand patterns. Evacuations of large population centers preceding the Hurricane increased passenger car travel and pre-storm fuel purchases, rapidly increasing gasoline and diesel demand at retail stations. This demand increase resulted in a large call on available inventories at product distribution terminals within the state.

Florida is mostly supplied by domestic refineries along the Gulf Coast and supplemented with imports. In the first half of 2017, tanker and barge movements of gasoline from the Gulf Coast, or Petroleum Administration for Defense District (PADD) 3, to the Lower Atlantic, or PADD 1C, which includes Florida, averaged 488,000 b/d (Figure 1). A large share of these movements were to Florida, with the Port of Tampa typically receiving the largest volumes, according to the EIA PADD 1 and PADD 3 Transportation Fuels Study. In 2016, Port Canaveral received the highest imported gasoline volumes of the ports in Florida, 15,000 b/d, with the largest suppliers being refineries in Europe.

Because Florida is largely dependent on marine movements from refineries of the U.S. Gulf Coast, any threat of or actual disruption to that supply, such as Hurricane Harvey, will result in higher prices in Florida markets. From August 21 to August 28, when Hurricane Harvey made landfall in Texas, the retail gasoline prices in Florida and Miami increased 10 cents and 5 cents per gallon (gal), respectively. Then as Hurricane Irma approached, increased demand and falling inventories caused Florida and Miami gasoline prices to increase $0.40/gal and $0.39/gal, respectively, between August 28 and September 4 (Figure 2).

After Hurricane Irma, demand for gasoline may be slow to recover. Roads will need clearing, power will need restoring, and evacuated residents may return over a longer time period than they were evacuated – which would likely to spread out demand recovery over several weeks. Markets are already anticipating a return to more normal conditions, retail gasoline prices in Florida decreased one cent/gal from the prior week to $2.69/gal on September 11.

As of publishing – the Port of Tampa, Jacksonville, and Port Everglades have reopened, with others to follow. Soon after, resupply via tanker will arrive from refineries in the Gulf Coast, and Europe, and from product storage terminals in the Caribbean, Canada, and elsewhere in the United States.

This article is part of Alerts


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