Fuel Oil Terminal Restricts Supplies

The Amerada Hess terminal in Groton, which is the region’s only supplier to fuel-oil companies, has imposed a quota on its customers because of the damage to Gulf Coast refineries by Hurricane Katrina. Jay R. Wilson, vice president of investor relations for the New York-based energy company, said that all 22 of its East Coast refineries have imposed restrictions on how much oil they will sell to each of Hess’ oil-company customers to ensure that it can meet demand.

“It was a tight market to begin with,” Wilson said. He said a pipeline supplying petroleum products to several
states also was shut down because of the Gulf Coast hurricane. “The demand has remained strong, but our ability to maintain supplies on the East Coast has been difficult,” Wilson said, adding that many other major terminal operators have imposed similar quotas on their oil supplies.

Hurricane Katrina skidded across the Gulf Coast on Monday morning, causing damage to refineries there as
well as some offshore oil operations. The storm damaged refineries, fuel pipelines and terminals and production sites in several states. Officials and oil company representatives were still trying Wednesday to assess the damage and determine when some of those facilities will be back in business.

Amerada Hess, which has extensive refining, exploration and production, and retailing operations, has two fuel-oil terminals – one in Groton, the other in Wethersfield – that serve the state.

“We’ll limit the amount of product that will move out of the terminals,” Wilson said. He said fuel-oil companies
that use the terminal on Eastern Point Road in the city of Groton have been advised of Hess’ actions. He declined to say what prices are being charged at the terminal or how much they may have risen this week as crude oil prices continued to fluctuate on the commodities market.

Despite the concerns over a disruption to oil supplies, crude oil prices trading on the New York Mercantile
Exchange for October deliveries closed the day’s trading at $68.94 a barrel after floating about the $70 range.
Prices throughout the day’s trading fluctuated wildly before closing lower for the day. A barrel of crude oil
represents 42 gallons.

Marc Mazzella, director of operations for Benvenuti Oil Co. in Waterford, said the action by the Hess terminals
wasn’t surprising, given this week’s volatile energy markets. “We’ve been dealing with Hess for the past 55 years and they’ve been very good to us,” he said. “It’s not a problem right now with quotas,” he said, “because it’s 85 degrees out there.” He said that quotas during the busy winter heating season would be a far bigger problem.

Mazzella said his oil firm, founded in 1950 by his grandfather, has not experienced any supply problems. He said that 75 percent of his firm’s business is done during the four- to five-month winter heating season.

“The bigger problem right now is the price of fuel,” Mazzella said. He said he regularly follows crude-oil prices
on the mercantile exchange and has been worried about its recent heightened volatility in advance of the busy winter months, when demand puts even more pressure on existing oil supplies. And he said he’s not alone. “Even people now follow the price of crude,” Mazzella said. “It’s miraculous how educated people have become about petroleum prices,” he said.

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