(Bloomberg) -- New York and much of the East Coast are at risk of a gasoline shortage this summer as the European Union’s ban of Russian fuel threatens to choke off the backup supplies the US relies on during peak driving season.
Seasonal gasoline stockpiles already are at the lowest in about a decade, and heavy winter maintenance at refineries may further trim inventories. The EU ban on Russian oil-product imports starting Feb. 5 will strain the region’s feedstock supplies, limiting how much gasoline the bloc can make for itself or the US East Coast, which increasingly relies on transatlantic imports in the summer.
The price spike that would accompany such supply shocks threatens to burden consumers still stinging from last summer’s $5-a-gallon gas. Resurgent pump prices also would pose challenges for President Joe Biden, who has made a priority of capping fuel costs and uses prices as a cudgel against political rivals.
To prevent New York and the rest of the East Coast from running out of fuel, suppliers will need to get creative. Although the US is a net exporter of gasoline, most of the excess is in the Gulf Coast, and transportation to the East Coast is constrained by insufficient pipeline capacity and the expense of waterborne shipping.
Suppliers could move fuel from the Gulf Coast into storage and blending facilities in the Caribbean, such as in the Bahamas, and then export from there to the East Coast, according to Energy Aspects, a London-based consultancy. The US also may draw more supply from Asia and the Middle East, but the lengthy journey and high shipping costs mean that option isn’t likely to provide quick or significant relief at the pump.
Average US gasoline prices have gone up by about 40 cents a gallon since Christmas and were about $3.51 a gallon as of Sunday, according to auto club AAA. The transition to more expensive summer-grade gasoline, which evaporates more slowly, will start in March and is likely to push prices higher just as warmer weather brings more drivers onto the road.
--With assistance from Barbara Powell.
(Updates with current prices in last paragraph)
©2023 Bloomberg L.P.
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