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Philadelphia Refinery Explosion Sends Gasoline Prices Higher

The outage occurred as the U.S. summer driving season kicks into high gear

A series of explosions early Friday tore through a Philadelphia gasoline refinery, the East Coast’s largest, sending shock waves for miles and raining debris on nearby neighborhoods just as the busy summer driving season gets underway. 

Four minor injuries were reported, according to the Philadelphia Fire Department. 

The three-alarm fire at the Philadelphia Energy Solutions refinery was contained but not under control, the fire department said. About 120 firefighters worked to cool off the areas around the fire to keep it from spreading. 

The fire turned the sky bright orange and shook the homes of startled residents. Some neighbors in South Philadelphia said debris rained from the sky into their neighborhoods after the explosions, according to NBC Philadelphia

The outage occurred as the U.S. summer driving season kicks into high gear. 


Gasoline futures jumped 3.5% Friday morning. Because RBOB futures reflect New York harbor prices, they are especially impacted by an outage in a refinery in Philadelphia, an important regional refining hub. In addition to the average $2.66 per gallon, pump prices on the East Coast could rise 3 cents to 5 cents per gallon as a result of the explosion, Wells Fargo said in a note to clients Friday. 

Natural gas prices also rose 1%.

“It’s a serious outage that’s going to greatly affect the East Coast in particular,” said John Kilduff of Again Capital. “There’s a cushion for drivers because we’re well supplied, but if there’s major damage, it’s going to change that dynamic dramatically.” 

Gasoline demand in the U.S. reached a record high last week, according to government data released Wednesday. U.S. drivers consumed a record 9.9928 million barrels a day last week. That is up from the 9.3 million barrels a day used a year ago. It was also up from 9.877 million barrels a day the week earlier. 

Refining stocks moved higher after the explosion. Valero Energy rose 1.5%, Phillips 66 was up 1% and HollyFrontier rose 1%. 

Tom Kloza of Oil Price Information Service said he does not believe the outage at the Philadelphia Energy Solution refinery will be a major problem for the well supplied U.S. gasoline market, despite a number of Gulf coast refineries in extended maintenance. He said the explosion impacted the unit that makes premium gas. 

The refinery said three separate explosions erupted around 4 a.m. in a vat of what is believed to be mostly propane. Earlier, the fire department said it was butane. 

The Refining Complex is running at a reduced rate. The cause and origin of the fire will be investigated once the scene is safe to enter, the fire commissioner said in a statement. The Chem Safety board, a non-regulatory federal agency, is also sending a team to investigate.

The fire department briefly ordered a shelter in place due to smoke. No evacuations were ordered.

The Philadelphia Department of Public Health said that there is no danger in the surrounding community. It’s preliminary testing showed no signs of ambient carbon monoxide, hydrocarbons (combustibles), or hydrogen sulfides in the air samples.

Philadelphia Energy Solutions was created from a joint venture between The Carlyle Group and Sunoco and emerged from bankruptcy last August. Carlyle still owns 10% of the facility and Energy Transfer Partners holds an 8% stake, sources told CNBC. Sunoco said that the refinery was a former facility, but that it no longer has ties to the complex. 

The 1,300-acre complex near Philadelphia’s international airport has a capacity of 335,000 barrels a day, and is the largest on the Eastern Seaboard, according to the site. 

Source: Energy Information Administration
oil refineries 2.1561128626453
Source: Energy Information Administration, total production capacity in barrels per day, 2018

The 153-year-old complex was established in South Philadelphia one year after the end of the Civil War. 

PES and the other related companies did not immediately return calls for comment by CNBC. 

— CNBC’s Patti Domm, Michael Bloom, Jim Forkin and Tom Rotunno contributed to this report.

This story first appeared on CNBC.com. More from CNBC:

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