Gasoline demand reached historic highs September 11 amid the imminent approach of Hurricane Florence to the North and South Carolina coasts and associated evacuation orders. Gasoline demand jumped to over 700,000 barrels per day (bpd) in North Carolina and South Carolina, according to Genscape Supply Side data analysis adjusted to U.S Energy Information Administration (EIA) Prime Suppliers, nearly 56 percent above EIA levels for September 2017. These are record-high totals in Genscape data, all the way back to 2014, and historic highs when comparing this daily level to monthly EIA Prime Supplier averages.
Hurricane Florence wind speeds weakened slightly to 110mph on September 13, after becoming a Category Four Hurricane on September 10. Forecasts show the storm will make landfall in the Carolinas as a Category 2 hurricane September 14 according to the National Hurricane Center (NHC), but its slow movement and large size could result in widespread flooding and high storm surge. Multiple states on the East Coast declared states of emergencies and more than 1 million people received mandatory evacuation orders. The number of people hitting the road is likely higher than the mandatory evacuation levels as inland residents flee the storm’s path.
Mass Evacuations Spur Temporary Spikes in Gasoline Demand
Amid the evacuations and expectations for inclement weather across the Carolinas, Virginia, and Georgia, daily gasoline rack activity jumped on September 10 and September 11. Trucks lift fuel from rack terminals to move to retail stations, and this rack activity can be used as a gauge for consumer demand. Across the four states, the combined gasoline rack activity level jumped to over 1mn bpd September 11. Genscape’s data showed total gasoline demand jumped to record daily highs of over 450,000 bpd in North Carolina and 250,000 bpd in South Carolina, On September 11, gasoline rack activity increased 37.1 percent in North Carolina and 31.3 percent in South Carolina compared to the previous week.
Gasoline rack activity also increased September 10 and September 11 in Georgia and Virginia, as forecasters predict heavy rain in those states. Georgia gasoline rack activity September 11 increased 12.1 percent from the previous week to 259,000 bpd. In Virginia, gasoline rack activity rose nearly 24 percent from the previous week to over 300,000 bpd on September 11. Generally, gasoline rack activity spikes ahead of hurricanes and winter storms, then falls during the weather event as demand significantly decreases.
Florence Threatens East Coast Oil Supply Chain
Although the large swings in gasoline demand will likely be the most prominent impact to the oil supply chain the wake of Florence, the storm will probably disrupt several other facets, including maritime movement. Dangerous sea conditions could hinder maritime operations in the Atlantic, potentially impeding crude and refined product imports to PADD 1.
Disrupted waterborne crude supply could impact refinery operations, although the majority of East Coast refineries should remain safe from direct storm impacts based on their geographical location. However, delays in getting waterborne gasoline shipments to ports in PADD 1C could lead to supply shortages and subsequent price spikes, depending on the storm's path and speed. Forecasters warned the storm could stall offshore later this week, which would prolong storm impacts.
Colonial Pipeline expects normal pipeline operations to continue based on projections for Florence, but the company remains in contact with shippers and terminal operators to assess any unexpected impacts, according to a September 12 bulletin. Any impact on Colonial's 2.6mn bpd Gulf Coast-to-New York Harbor refined product pipeline system may lead to higher prices at the pump in Southeast and East Coast states.
Hurricane Season Poses New Risks Post-Florence
Two additional Atlantic storms follow in the wake of Hurricane Florence, although they do not pose immediate threats for U.S. landfall. Tropical Storm Isaac reached wind speeds of 60 mph northeast of South America on September 12. The projected path at that time showed Isaac passing south of the Caribbean islands as a tropical storm. Further east, Hurricane Helene reached wind speeds of 90 mph and was expected to move north and remain over the Atlantic for the entire three-day forecast. Additionally, an unnamed tropical disturbance in the Gulf of Mexico had a 60 percent chance of cyclone formation as of September 12, according to the NHC. Any deviation from the projected magnitude and path of these storms could put coastal regions in danger, soon after Florence wreaks havoc on the East Coast. Genscape will continue monitoring the impacts of Hurricane Florence and other storms as the 2018 hurricane season unfolds.
Genscape’s Supply Side Monitor and Analyst data provides daily and hourly insights into the volumes of products sold at the rack city level in PADD 1 sub-regions and monitors real-time changes in the market conditions and prices in short and longer-term. To learn more and stay updated on the Florence, request a trial of Genscape’s Supply Side Monitor and Analyst products, please click here.