East Coast faces gas shortages, price hikes after pipeline leak

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A leak has caused the closure of a crucial pipeline that carries gasoline to the eastern United States, a disruption that threatens to drive up prices and leave service stations without fuel to sell.

A section of the Colonial Pipeline, which runs from Houston to New York, has been closed since Sept. 9 after a spill of roughly 250,000 gallons was discovered in rural Shelby County, Ala.

The major pipeline, one pipe of which has been severed, provides gasoline for an estimated 50 million people on the East Coast each day, according to company estimates. The cause of the leak has yet to be determined, according to the company's most recent statement.

The pipeline's operator has said full service will not be restored until at least next week. The closure has set off an industry-wide scramble as suppliers seek alternative ways to transport gasoline to the East Coast.

colonial gas pipeline

Prices have yet to move much. They're only up a penny or two in the last week in states such as Georgia, South Carolina and Tennessee, according to AAA.

But gas prices could spike by as much as 15 cents per gallon or more in those three states, as well as North Carolina and Virginia, in the next week according to GasBuddy.com analyst Patrick DeHaan.

Ships have already been dispatched to carry fuel from Texas to New York as part of the effort. There are also likely to be far more tanker trucks on the road carrying gasoline than normal said Tom Kloza, chief oil analyst with the Oil Price Information Service. But pipelines are by far the cheapest way to move gasoline or oil, so any alternative will raise costs. And not every station will be able to get the gasoline it needs, he said.

"You're going to see some places without gasoline," he said. "It's like a mini-hurricane."

The pipeline operator said that based on its current projections, parts of Georgia, Alabama, Tennessee, North Carolina and South Carolina will be the first markets to suffer potential supply disruptions.

The governors of Alabama and Georgia have already declared states of emergency.

The Northeast markets such as New Jersey at the end of the pipeline are less likely to see an impact because they can get gas from other locations, said Kloza.

colonial pipeline 2
Repair work underway at site of the gasoline spill.

Gas prices typically fall at this time of year. Thursday was the day that stations in most of the country could start using the cheaper winter blend of gasoline rather than the summer blend, which is formulated to combat smog.

"People are going to be seeing a 5 to 10 cent a gallon increase at a time they're normally seeing a 5 to 10 cent a gallon price drop," said Kloza.

Related: Global glut forecast puts pressure on oil prices

Mansfield Oil, a fuel distributor, has warned its customers to take fuel savings measures and to place their orders early. The company said the supply of gasoline is currently very thin along the closed pipeline, and that it was trucking in supplies from the coast to meet demand.

The company said it was treating the situation "with the same importance and urgency as a natural disaster."

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