Colonial Pipeline Update: 5/13/2021

Late on Wednesday, 5/12, Colonial Pipeline announced that it is resuming all regular operations, effective immediately. According a statement issued by the company, “Colonial will move as much gasoline, diesel and jet fuel as is safely possible and will continue to do so until markets return to normal.”

This is welcome news in an environment that left many states’ gas stations depleted of fuel. However, it will take several days to reach normal supply levels. While fuel is readily available, the issue is transporting of that fuel to stations that sell it to the final consumer. Much of the attention has focused on regular gasoline. The situation around diesel – freight transportation’s main fuel – has been less clear. Based on reports from the Wall Street Journal, “Diesel remains generally available even as panic buying by drivers fearing shortages has propelled gasoline prices higher and depleted gas supplies across states including Virginia, Georgia, North Carolina and South Carolina. Truck-stop operators are leaning on suppliers and bringing in fuel from other markets, with some reporting sporadic supply disruptions before the pipeline restarted operations.”

Overall, diesel continues to be available at stations throughout the affected states. Some stations have seen short-term fuel outages, but these were restored within hours. According to FreightWaves, “Dale Bennett, the president of the Virginia Trucking Association, said he has not received reports of drivers having difficulty finding fuel on the road. Separately, in a phone call made to the giant White’s Truck Stop on Interstate 81 in western Virginia, a staff member told FreightWaves when asked about diesel supplies: ‘So far, so good.’ Some of his members who buy diesel in bulk, which is stored at their terminals, are seeing delivery delays. ‘They are having to wait three days for delivery of fuel rather than the usual same-day delivery for bulk storage to fuel their trucks.’”

Many carriers across all modes store fuel at their terminals. While this supply is not inexhaustible, given that the Colonial Pipeline is now operating, any disruption to operations will be limited. According to reports by the Wall Street Journal, “Chattanooga, Tenn.-based Covenant Logistics Group Inc. said it was watching markets in Virginia, Georgia, North Carolina and South Carolina closely, had only experienced limited problems so far and was ‘working hard with our fleets to make sure if they are headed into those areas, that they are topped off as best as possible.’” The state of emergency declared by the affected regions have also waived hours of service requirements for carriers that haul fuel, which will speed up replenishments in these states.

While the overall impact will be limited and short-term, the shutdown of the Colonial Pipeline may affect freight capacity for the next two weeks. The Jones Act has been waived to allow additional supplies of fuel to be delivered to the eastern seaboard. This action should speed up replenishment efforts.

In response to the Colonial Pipeline closure, some carriers paused hauling of freight into and out of the affected areas. As supply of freight transportation capacity rebalances to accommodate availability to Southeastern states, there may be a short-term impact to carrier acceptance rates. As a result, there may be an increase to rates charged for shipments into and out of the Southeast.

Odyssey will continue to monitor this situation. Should there be any material changes, we stand ready to respond and update our clients with respect to any adverse impacts to operations.