Refineries Cut Down Oil Production in the Wake of Hurricane Sandy

November 1, 2012

The largest refineries in the Northeast are scaling down production or shutting down in the wake of Hurricane Sandy. Oil prices are also sliding down since it appears the demand for oil will decline sharply. There is just not that many people driving but everyone was filling up before the storm hit so there was a lot of fuel sold a few days ago in late October.

Gas Stations Closing Down

The Linden, N.J. refinery of Phillips 66, the second-largest in the Northeast with an output of 285,000 barrels a day, has shut down operations for now.

Huge Repairs

Philadelphia Energy Solutions, the largest refinery in the area, is also very nearly shut. Most of the other major refineries in the Northeast are now running at much reduced capacity. Hurricane Sandy has been causing extensive devastation, which means businesses could also be shut down for several days. If this happens, the demand for gas and other oil products will continue to drop. But the demand for wood and building repair materials will increase drastically in the days and a couple of weeks ahead.

A Huge Storm

Phil Flynn, a senior market analyst for Price Futures Group, says that shutdown of major cities and power outages "may take a toll on demand unlike anything we have seen before. The impact on demand may not last for hours but more than likely for days."

A Heavy Blow

Tom Kloza, chief oil analyst at Oil Price Information Services, estimates that the decline in demand for oil and other refined products "will be about as significant as we've seen since Katrina made landfall" in 2005.

Playing it Safe

According to Cherice Corley, spokeswoman for the Philadelphia Energy Solutions refinery, which has a capacity of 330,000 barrels of oil per day, some of the units are operating only at "minimum safe operating levels."

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