Testimony at a US Senate subcommittee hearing in North Dakota took a close look at how local markets can feel the impacts of seemingly distant events.
US Sen. Byron L. Dorgan (D-ND), who chairs the Appropriations Committee’s Energy and Water Development Subcommittee, held the hearing in Bismarck to examine gasoline and diesel shortages in upper Great Plains states this summer and fall. Officials from area refiners, a pipeline, and two petroleum marketer associations testified.
So did Howard Gruenspecht, deputy administrator of the US Energy Information Administration. North Dakota, he observed, receives oil products through the NuStar and Magellan pipelines and from northern refineries such as Tesoro’s plant in Mandan, ND, and Cenex’s in Laurel, Mont. Several refineries that serve the state experienced outages, both planned and unplanned. “The Coffeyville refinery in Kansas that flooded this past summer feeds directly into the Magellan system,” Gruenspecht said.
Pull on supply
Refinery outages elsewhere also had an impact. Some of the biggest, such as at BP PLC’s 400,000-b/d Whiting, Ind., plant, increased pressure for products from upper Midwest refineries. But competition also grew for supplies from Explorer and other pipelines from the Gulf Coast. “This pull on supply competes with volumes that might otherwise move further west,” Gruenspecht said.
Planned outages can be less disruptive but still limit supplies, he added. While a refiner planning maintenance usually lines up supplies from other sources to meet contractual needs, it might not include noncontract or spot purchasers. A planned outage also might take longer because problems are found when maintenance begins, forcing a refiner to buy more spot market products for contract customers, according to Gruenspecht.
“During times such as were seen this past summer, the federal and state governments looked at options to relieve the situation,” he said. “At the end of August, the federal government granted North Dakota’s request for a waiver to use some gasoline supplies from Canada that were thought to be slightly ‘off-spec’ from US summer gasoline requirements. Still, gasoline supplies remained tight.”
No diesel waiver
Meanwhile, diesel prices started to rise from growing harvest demand. Gruenspecht said he understood federal and state officials discussed distillate fuel supply and decided not to provide a waiver because supplies were not available.
Terminal outages also made truck drivers travel greater distances to find oil products, he said. North Dakota and other affected states issued executive orders approved by the Federal Motor Carrier Safety Administration to extend service hours for fuel supply truck drivers.
“Refineries are returning to more normal operations, which will ease the tight balance in North Dakota, but we cannot predict exactly when the problems will cease,” Gruenspecht said.
