Fuel premiums add to shipper woes as New York’s fuel inventories deplete

The Colonial Pipeline, supplying fuel from the US Gulf Coast to New York, is already running at full capacity, and coupled with low supplies from Europe, the situation is getting worse by the day as New York’s fuel inventories deplete. As a result, shipping companies (shippers) are paying a steep premium to transport fuel to the Empire State on boats. According to Bloomberg, two ships carrying fuel are expected to arrive in New York by the end of the week from Texas and Louisiana.

Record keeping for fuel inventories in New York started nearly 30 years ago, and since then it is the lowest that the inventories have hit. But the demand has been on the a constant rise, causing extreme inflation of fuel prices.

According to the Merchant Marine Act of 1920 (also called the Jones Act) mandates that goods traveling between US ports must be carried by American-made ships and staffed by a US crew. However, in the current times, complying with the Jones Act means an addition of USD 4.54 to the cost of a single barrel, compared to similar routes in the international market.

According to Reuters, Some some oil companies are finding a legal workaround to the Jones Act by transporting unfinished gasoline products from the Gulf Coast to the Bahamas, which are then blended into finished gasoline and shipped off to the US East Coast. Since after Russia’s attack on Ukraine, at least eight cargoes have completed the route and then delivered fuel to ports along the Atlantic, according to Reuters.

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