Gasoline futures jumped the most in three months after an explosion and fire at the Philadelphia Energy Solutions oil refinery, the largest on the U.S. East Coast and a key supplier to the New York gasoline market.

The fire threatens to boost fuel prices from Delaware to Maine just as summer driving season begins, a time of peak demand. Gasoline futures for July delivery rose as much as 4.5% on the New York Mercantile Exchange, undermining a 20 cent a gallon average price drop nationally in May and June.

The blaze could shut in about 2.7% of East Coast demand, according to Bloomberg estimates. The fire is under control, but not out, with all employees accounted for. Because it’s a chemical fire, it could burn all day, said Jim Smith, a supervisor with the Philadelphia Fire Department.

“Any shortage ahead of the peak of the summer driving season does not bode well for U.S. consumer pocketbooks,” Joe Brusuelas, chief economist at RSM US, said on Twitter.

The blaze started after a leak in an alkylation unit, used to make high-octane gasoline, triggered explosions that shut down the Girard Point section of the refinery, according to people familiar with the plant’s operations.

The blast was so large and so hot that it was captured from space in satellite infrared images, the National Weather Service’s Key West office wrote on Twitter.


The company believes what’s burning now is mostly propane, said Cherice Corley, a PES spokeswoman, in an emailed statement. The refining complex is running at a reduced rate, she wrote.

The complex comprises the Point Breeze and Girard Point plants. It can process 335,000 barrels of crude a day, and is the main supplier of fuel to the New York Harbor market, where inventories of gasoline are currently just below average seasonal levels. It sends fuel via pipeline and barge to New York and New England, and through pipelines to upstate New York and across Pennsylvania.

The shortfall could be made up with inventory draws from the local region in the near term and from imports over the longer-term, according to Andy Lipow, president of Lipow Oil Associates in Houston.

Supplies on the Colonial pipeline destined for other markets could be diverted into Pennsylvania, while it takes about 11 days for a tanker to reach the East Coast from Northwest Europe, according to Lipow. But, he said, “there’s certainly going to be price increases from an initial shortfall.”

The Point Breeze section was already undergoing repairs following a fire in a pump that occurred earlier this month.

Gasoline futures for July were trading 6.31 cents a gallon higher at $1.8494 at 10:39 a.m. local time. Physical gasoline traded almost 1 cent higher versus futures, according to people familiar with the market.

Due to a smoke plume, residents and businesses in the area were initially asked to stay in their homes out of precaution, the City of Philadelphia Office of Emergency Management said in a tweet. The shelter-in-place request was subsequently lifted for portions of South Philadelphia, it said.

There have been refining operations for 150 years at the site, which has passed through a series of owners, including Chevron Corp. and Sunoco before being consolidated into Philadelphia Energy Solutions, a partnership formed between The Carlyle Group and Energy Transfer Partners’ Sunoco.

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