Supplies of ultra-low sulfur diesel in the U.S. East Coast may be tight for a year or more because of refinery shutdowns and transportation constraints hampering shipping from the Gulf Coast, the Energy Department said.
Diesel will be “the most challenging product to replace as there are few alternative supply sources outside of the U.S. Gulf Coast,” the department said today in a report. The Northeast will also see its consumption of ULSD increase by 20 percent on average because of stricter requirements for heating oil sulfur content that start in July in New York.
Infrastructure changes will be necessary to accommodate the changing product flow as the need for imports into the East Coast increases, the department said. Companies may delay making significant investments in new logistical arrangements until they know the status of Sunoco Inc.’s Philadelphia refinery, according to the report.
Sunoco Inc. (SUN) and ConocoPhillips (COP) have idled two Pennsylvania refineries and Sunoco plans to shut its Philadelphia plant by June if it can’t find a buyer. The three refineries together represent about 50 percent of total East Coast refining capacity.
The closure of the Philadelphia plant may leave the East Coast short 240,000 barrels a day of gasoline next year, according to the report. The combination of the plant shutdown and tighter regulations will curtail diesel supply by 180,000 barrels daily, the department said.
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