Many in the gas and oil industry are aware that Buckeye Partners’ affiliate Laurel Pipeline has asked the Pennsylvania Public Utility Commission to approve reversing the flow of the pipeline that delivers gasoline and other products to western Pennsylvania. However, very few Pennsylvanians truly understand the negative implications this would have for their families, as the proposal lays a rotten egg on promises of lower gas prices and a reliable fuel supply.
Some would want you to believe that reversing the pipeline would be beneficial to Pennsylvanians, but that is simply not what the facts would support. As suppliers to the region for decades with the mission of being a dependable, low-cost fuel provider to our customers, we have developed a comprehensive understanding of the supply chain and logistical options. We believe the proposed reversal of the pipeline would eliminate necessary supply sources the commonwealth has long depended on, resulting in higher prices and potential shortages for consumers while benefiting Buckeye Partners and granting Midwest refineries exclusive access to the Pittsburgh market.
It is for these reasons that Giant Eagle and Sheetz have joined with other Pennsylvania businesses — including shippers, terminal owners and refiners — in formally opposing the reversal.
Currently, the Pittsburgh region — which includes Centre County — can receive petroleum products from both East Coast and Midwest refineries. This creates healthy competition that results in the best pricing for businesses and consumers alike. The access to the East includes supply from East and Gulf Coast refineries in addition to imports into New York Harbor. The proposed reversal would place all of our eggs into a very confined basket, blocking deliveries from this highly competitive marketplace by limiting the Pittsburgh region to products from Midwest refineries. Product sourced from the East is cheaper than the Midwest eight out of 12 months of the year. Pricing drives the fuel market; it is safe to say that if Midwest fuel was cheaper, the Pittsburgh market would currently be flooded with it. The reality is, that occurs only a third of the time.
Under the current system, fuel costs for businesses are kept in check because companies can negotiate a lower price for the fuel. This is because they have the option of buying from either East Coast or Midwest refineries. The flexibility of having a supply choice means lower cost product. Those savings can then be passed on to consumers. For the majority of the year, pricing for gasoline sourced from the Midwest is significantly more expensive than gasoline sourced from East Coast suppliers. Making matters worse, gasoline can cost 50 cents per gallon more in the Midwest during the peak driving season.
Refineries in the Midwest are already stressed during the summer months and are unable to meet consumer demands — leading to the importing of fuel into that region. The Pittsburgh region receives more than half of its product from the East. If the Midwest can’t fully supply its own needs now, how does it plan to supply the entire Pittsburgh region if the pipeline is reversed? The answer is that it simply cannot happen.
The reversal jeopardizes the supply security of the region by taking away a major source of supply from the East. By eliminating this key source of supply, the Pittsburgh region is susceptible to price spikes and possible shortages. Unplanned refinery outages in the Midwest due to mechanical problems or bad weather have happened in the past and will in the future. When these outages have occurred in the past, prices have skyrocketed up 70 cents per gallon. This happens even when there is eastern supply to help buffer a price spike. Without the eastern supply, prices could go up $1 or more per gallon and stay there for longer periods of time. This would be devastating for Pennsylvania businesses, jobs, working families and our transportation infrastructure.
For more than a half century, the current system has served Pennsylvania well. If Buckeye gets its way, reversing the flow of the Laurel Pipeline will mean higher gasoline prices, potential price spikes and shortages for consumers. The facts speak for themselves; the reversal is bad news for consumers and bad news for Pennsylvania.
Mike Lorenz is executive vice president with Sheetz and Polly Flinn is senior vice president and general manager with Giant Eagle-GetGo.