The recent California wildfires, the most destructive in Los Angeles history, have led to power outages forcing Kinder Morgan to shut down two major fuel pipelines. While the pipelines themselves are not directly affected by the fires, the resulting power loss has halted operations since January 8th. This shutdown impacts fuel supply to major cities across the Southwest, raising concerns about potential shortages.
Table Content:
Impact on Fuel Supply Chain
The shutdown affects the 515-mile SFPP West pipeline and the 566-mile CALNEV pipeline. SFPP West transports fuel from the Los Angeles Basin to Colton and Imperial, California, as well as to Phoenix, Arizona. CALNEV delivers gasoline, diesel, and jet fuel from Colton, California, to terminals in Barstow, California, and Las Vegas, Nevada. A West Coast fuel trader, speaking anonymously, highlighted the significance of the disruption, stating, “Yikes! That’s how product gets to Phoenix, Las Vegas and San Diego.”
The outage has raised concerns about potential fuel shortages in these areas, although the ability of the pipelines to catch up after power restoration remains dependent on existing inventory levels. According to the California Energy Commission, California refineries held approximately 5.2 million barrels of CARB gasoline in stockpiles as of January 3rd. No refinery outages in California have been reported due to the wildfires.
Power Outages and Restoration Efforts
As of Thursday, over 300,000 customers in California were without power, according to Southern California Edison. Kinder Morgan anticipates resuming pipeline service once power is restored. The company stated that neither pipeline has sustained direct damage from the fires. The duration of the shutdown and its ultimate impact on fuel availability remain contingent on the speed of power restoration efforts.
Potential Market Implications
While current gasoline stockpiles provide a buffer, prolonged outages could lead to price increases and potential supply disruptions. The situation underscores the vulnerability of critical infrastructure to natural disasters and the interconnectedness of energy supply chains. Market observers will be closely monitoring the progress of power restoration and the subsequent resumption of pipeline operations. The impact on fuel prices and availability in affected regions will depend on the duration of the outage and the ability of refineries and distributors to manage existing inventories.
Kinder Morgan headquarters in Houston, Texas.
Reuters logo.
