Hurricane Sandy is expected to make landfall near the southern coast of New Jersey this evening. The storm has already dealt damage to Cuba, Jamaica, and Haiti, and is expected to carry significant storm energy northward into the mid-Atlantic and northeastern United States. Power outages are already being reported, but many more are expected: according to a Johns Hopkins engineering model, up to 10 million people may lose electricity in the mid-Atlantic over the next week. Utilities are already staffing up and hiring external contractors to assist in the storm recovery efforts. State governors are declaring a state of emergency to waive limits on how many hours utility workers can drive and work, to allow workers from other states and Canadian provinces to assist.
Hurricane Sandy's effects on energy are not limited to electric infrastructure. Petroleum refineries - and by extension oil and gas markets - will also be impacted by the storm. According to a situation report released this morning by the U.S. Department of Energy's Office of Electricity Delivery & Energy Reliability, at least one petroleum refinery has already shut down. Phillips 66's Linden, NJ refinery has shut down its production; the Linden refinery is capable of producing 238,000 barrels per day.
The report also cites trade press reports indicating reduced production at two other mid-Atlantic oil refineries, Philadelphia Energy Solutions’ Philadelphia, PA refinery (335,000 b/d capacity) and PBF Energy’s Delaware City refinery (182,200 b/d capacity). Hurricane Sandy's impacts to refineries are not limited to those processing crude oil; the report also cites reduced production rates at Hess Corporation’s Port Reading, NJ facility (70,000 b/d capacity), which processes gas oils to produce petroleum products.
Collectively, these refineries do not account for a significant portion of the nation's refining capacity. However, the impacted facilities' concentration in the mid-Atlantic may temporarily raise gasoline prices in the mid-Atlantic and northeastern U.S. A key factor affecting the extent of this price bump will be how quickly the refineries can return to full production.
When tomorrow morning comes, the storm's direct impacts will be well underway, as will restoration efforts. Last year's October storm, Hurricane Irene, left many electric utility customers without power for over a week. How will Sandy compare to Irene?