Updated Nov. 1, 2016 12:59 p.m. ET
Gasoline and diesel prices soared Tuesday after a major fuel artery was severed for the second time in two months, cutting off the pipeline that supplies much of the East Coast with gasoline, diesel and jet fuel.
The outage on the Colonial pipeline following a Monday explosion threatens to cause gasoline shortages across much of the southeast and could cause flight disruptions at airports from Baltimore to Raleigh, N.C.
Colonial Pipeline Co. said it shut down its main gasoline and diesel pipelines after the incident in Shelby County, Ala., about 35 miles south of Birmingham. Work crew equipment struck one of the lines, causing a fire that killed one person and injured several others.
Gasoline futures shot up as much as 8% on the New York Mercantile Exchange following the news. The gains at one point on Tuesday were the biggest in eight years before narrowing.
Analysts said they expect disruptions from the explosion to pass onto drivers and fliers over the next several days.
The closure is causing many to worry about price spikes and fuel shortages in the southeast and up the Atlantic coast. Colonial’s 5,500-mile pipeline system carries 2.5 million barrels of fuel a day from Houston as far as New York Harbor, supplying 13 states and about 40% of the gasoline consumed on the East Coast.
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Gasoline futures at one point rose nearly 12 cents to $1.5387 a gallon on the New York Mercantile Exchange. Diesel futures rose 4.5 cents, or 2.99%, to $1.5489 a gallon.
It is the second major incident on the pipeline in recent months. In September, the company’s primary gasoline shipping route was partially shut after a leak of as much as 8,000 barrels was discovered in Alabama, a few miles from the site of Monday’s incident.
The leak in the Colonial pipeline discovered in September caused a partial closure of the gasoline pipeline that lasted for 12 days.
Colonial said on Tuesday that the diesel pipeline resumed operations at midnight and that the gasoline line is scheduled to restart Saturday, but that could change after the company gets more information. Colonial said it would work with shippers to send gasoline through the diesel line.
During the previous slowdown, gasoline prices jumped by more than 20 cents in a matter of days throughout Georgia and in parts of Tennessee and South Carolina. Atlanta filling stations experienced gasoline shortages after some drivers made multiple trips to fuel up all their cars.
“Just having one line shut down caused a circus. Imagine having both,” said Patrick DeHaan, senior petroleum analyst at GasBuddy. “It’s much more grave of a situation, and prices are shooting up.”
The East Coast has become more dependent on fuel deliveries from the Gulf Coast after refineries along the Eastern Seaboard have shut down in recent years. Earlier this year, Kinder Morgan halted plans to build a fuel pipeline from South Carolina to Jacksonville, Fla., amid local opposition and legislation in Georgia aimed at preventing the pipeline from being built. The pipeline was slated to open next year.
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A crucial pipeline that carries gasoline and other fuel to the U.S. East Coast has been shut down for the second time in two months, bringing a new threat of price hikes at the pump.
A fire broke out Monday afternoon along a section of the Colonial Pipeline in Alabama, killing one person and injuring five others, the pipeline operator said. Images from the scene showed a massive plume of flames and smoke towering over nearby trees.
The blaze, which continued to rage late Monday, prompted the closure of the pipeline, which stretches from Houston to New York and provides gasoline for 50 million people, according to company estimates.
AAA said the shutdown is likely to cause gas prices to rise in the southeastern and mid-Atlantic regions of the country.
In early September, part of the pipeline was closed for nearly two weeks because of a huge gasoline leak. That caused gas prices to spike by 28 cents in Georgia and 17 cents in Tennessee, according to AAA.
“We were just beginning to recover from the gas price hikes we saw from the pipeline closure in September,” said Garrett Townsend, an AAA spokesman in Georgia. “The explosion will at least temporarily put a halt to the pump-price dip we’ve experienced over the past 30 days.”
Monday’s fire started several miles from the area in Shelby County, Alabama, where the September spill happened. The blaze erupted after a crew working on the pipeline hit it with a trackhoe, causing gasoline to ignite.
The Colonial Pipeline has two main lines: one for gasoline and another for things like diesel and jet fuel.
In September, Colonial reopened the diesel and jet fuel line as soon as it determined the leak was coming from the gasoline one. However, the gasoline line remained off line for almost two weeks until the company could build a temporary bypass.
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