Florida, the biggest gasoline market on the East Coast, is enduring a supply squeeze and higher prices just a month before the start of hurricane season.
The state, surpassed only by California and Texas in gas consumption, has no refineries and relies on tanker and barge deliveries for 97 percent of its supply. Stockpiles are about 7 percent lower than a year ago.
Florida's fuel market underscores how the shale-oil revolution created winners and losers, with the Gulf Coast awash in cheap crude and other regions missing out because they lack transportation and refining capacity. A shortage of the U.S.-flagged tankers that Florida relies on for deliveries, along with hurricanes after June 1, may spur higher prices.
"People are thinking we're flush with oil and that there's more stability and lower prices," Ryan Mossman, a vice president at FuelQuest Inc., a fuel-management firm in Houston, wrote in an email Monday. "What we're seeing in Florida exposes the fragility that still exists in the supply chain."
Energy producers are using hydraulic fracturing and horizontal drilling to reach oil trapped in shale formations, increasing production to the highest level in 26 years. The boom helped the U.S. meet 87 percent of energy needs in 2013, the highest since 1985, according to the Energy Information Administration.
Gasoline stockpiles in Southeastern states including Florida slid for eight-consecutive weeks to 20.9 million barrels on March 28, the least since November 2012, Energy Information Administration data show. A three-day shutdown of the Houston Ship Channel in March, the result of a crash that caused a 4,000-barrel spill, exacerbated the decline as fuel deliveries from Louisiana and Texas refineries to Florida ports were cut off.
Retail gasoline in Florida averaged $3.69 a gallon Wednesday, auto club AAA said. Chevron Corp. was selling wholesale, gasoline Tuesday in Fort Lauderdale for $2.79, according to DTN Televent data. The average price of a gallon of gasoline Wednesday in Arkansas was, $3.43, according to AAA.
Danny Alonso, owner of fuel distributor MacMillan Oil in Hialeah, Fla., had supplies rationed daily when the Houston Ship Channel closed and often ran out. The shortages forced station owners to raise prices and some to shut for hours at a time, he said.
The market is so tight now that "any hiccup is going to be reflected big time," Alonso said by telephone in late April. "So what happens when a hurricane shuts down the Gulf for a week or 10 days?" The Atlantic storm season runs through November, typically peaking in September. Florida has been struck by more tropical systems than any other state.
An El Nino weather system that can create winds capable of ripping budding hurricanes apart may help spare Florida late in the season. There's a 65 percent chance the Pacific Ocean warming pattern will develop after August, according to the U.S. Climate Prediction Center in College Park, Md.
Fuel companies are dealing with the aftermath of the Houston channel shutdown as they work to supply a record 100 million tourists expected to visit Florida this year, as well as a population that has grown to just shy of New York. Some are driving to Georgia in search of supplies from a Colonial Pipeline Co. spur that delivers to Bainbridge.
Drivers for Port Consolidated Inc., a fuel distributor in Tampa, are waiting as long as two hours to fill their trucks at port terminals, said Rick Williams, operations manager with the company.
"Every day we go the ports and we just hope we get our trucks loaded," Williams said. "One day there's no gasoline, the next day there is no diesel. It's a crapshoot."
Florida has taken measures to improve its response to supply disruptions by strengthening port security and by efforts to reopen ports and roads after natural disasters, said Bryan Koon, director of the state's Emergency Management Division.
"Restoring the critical infrastructure, power and communications to facilitate the flow of fuel -- that's where we're focused," he said. "Yes, hurricane season is coming up, but frankly, the petroleum industry in Florida is pretty resilient."
Florida's Port Everglades, one of its largest fuel-delivery points, is taking 300,000 barrels a day of refined products, with almost three-quarters coming from other parts of the U.S., said Paul Stanton, director of petroleum at the port.
"Our volumes are steady, but we're hearing that it's a tight market for U.S.-flagged ships," Stanton said. "Vessels to move product are hard to find."
Only 42 tankers meet the criteria to carry oil and refined products between U.S. coasts, RBN Energy LLC said in a research report Jan. 12. Those available to Florida are shrinking as companies including Phillips 66 and Valero Energy Corp. charter them to move oil to refineries on the East Coast and Canada.
Business on 05/08/2014