Why gasoline could be in short supply this summer on East Coast

For sale: unprofitable Sunoco refinery in Philadelphia; supplies 24 percent of East Coast's gasoline; must sell by July 1 or will be shut down.

Really, no kidding.

The petroleum industry is shutting down US refineries, especially in the East, almost as fast as Americans are trading in their gas guzzlers for fuel sippers – and that does not bode well for East Coast motorists this summer.

The closures mean gasoline refined elsewhere – the Gulf Coast or even Europe – will need to be shipped to the region by tanker, barge, or rail, causing higher prices at the pump and perhaps even supply disruptions in places like Washington, New York, and Boston.

As demand for gasoline has slackened (due in part to a weak economy and greater fuel-efficiency for cars), refiners have struggled to sell enough product to stay in business. Several refineries that supply gas to the East Coast have already closed: Hess has shuttered a major refinery in the US Virgin Islands; ConocoPhillips has stopped making oil products at a refinery in Trainer, Pa.; and Sunoco has already closed another, smaller refinery near Philadelphia.

If Sunoco cannot find a buyer for its big Philadelphia refinery, almost half of the total East Coast refining capacity will be in mothballs. Overland pipelines bringing gasoline to the region are already running at capacity, so there's no hope for making up the difference that way.

"It is going to be expensive this summer to get gasoline to East Coast markets," says Sander Cohan, a principal at Energy Security Analysis Inc., a research firm in Wakefield, Mass. "It would not be surprising to see an average of $4.50 a gallon [in those markets], which means it could be $5 a gallon in some places."

Just how dire the supply situation becomes in the East hangs on the fate of the Sunoco refinery in Philadelphia, situated along the Schuylkill River. The plant has been refining crude oil since the 1860s. Sunoco says there has been "limited interest" among buyers.

Industry observer Tom Kloza, publisher of Oil Price Information Service (OPIS), expects something will happen to keep the Sunoco refinery running. "I think heaven and earth will be moved to make sure [closure] does not happen," he says. "Everyone is concerned."

But if the plant is shuttered, some warn that a solution is not close at hand for bringing in "replacement" gasoline.

The industry may not be able to get a smooth supply line worked out for a year, warned the US Energy Information Administration in a February analysis. Until oil companies know whether the Sunoco refinery will be open or closed, they "are not likely to make significant investments in new logistical arrangements," the EIA said.

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