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East Coast Fuel Supply Hampered By Tanker Shortage

Shipments of fuels to the East Coast, parts of which are experiencing fuel shortages after the Colonial pipeline outage, have been made extra difficult by another shortage—this time of tankers.

Reuters reports, citing unnamed sources from the shipping industry, that shipowners had mothballed a number of tankers that could have been used to carry fuel north from the Golf Coast.

The problem is that only U.S.-flagged tankers can make the coastal journey under legislation known as the Jones Act. Earlier this week, Reuters reported that the federal government was considering a temporary waiver of the Jones Act to ensure an adequate fuel supply. This will, however, take time.

Meanwhile, the mothballed tankers could be restarted, but this, too, will take time: as much as 10 days, according to Overseas Shipholding Group, which idled six tankers licensed to carry oil and fuels along the East Coast during the first quarter because of slow demand for the vessels.

In the absence of tanker capacity, gasoline and diesel will be transported by tanker trucks, with the Department of Transportation saying this week it had identified 10 states where the transport of overweight loads of fuel is possible on interstate highways.

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The outage of the Colonial Pipeline network that supplies 45 percent of the gasoline and diesel that the East Coast consumes caused fears of shortages, which in turn led to a run on fuel stations, causing a jump in prices and a drop in supply.

Meanwhile, refiners on the Gulf Coast are scrambling for available tanker capacity to stock their fuel offshore. Refiners are also booking vessels to ship fuel to destinations such as the Far East, Brazil, and the Caribbean. As a result, tanker rates are going through the roof as well.

Colonial Pipeline Co. said yesterday that it had begun to restart operations. Still, the full resumption of normal operations will take a few days.

By Charles Kennedy for Oilprice.com

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