Report

Subject:                     US - Fire at Magellan Wholesale Partners

Date of Email report:   Thu 05/06/2008

Report Detail:

As severe storms moved through most of the area Tuesday night, lightning hit a fuel storage tank in Kansas City, Kan., causing it to explode.

At midday, smoke continued to rise from the fire at a fuel storage tank in Kansas City, Kan.

A fire Tuesday evening at a Kansas City, Kan., wholesale fuel terminal raised the possibility of a price spike and gas shortages in a day or two as supplies tightened. But the terminal, even before the fire had been completely extinguished, reopened its loading racks Wednesday afternoon, and tanker trucks quickly began transporting fuel to area stations that needed it.  That break coincided with another that affected gas prices nationwide. Federal data released Wednesday showed a continued weakening in gasoline demand and an increase in gas stockpiles. The result: a decline in wholesale prices including a 16-cent drop in the Midwest. While local markets could remain temporarily rattled by the fire, the price dip could be seen at the pump in a day or two, and more drops could be ahead as the fuel market has finally started to cool off. “They’re selling off hard,” said Lewis Adam, president of Admo Energy, which assists companies including gas stations in managing their energy costs. The Energy Information Administration, in its weekly report on the petroleum market, said gasoline inventories increased by 2.9 million barrels. Gasoline demand over the last month has declined about 1.4 percent. The percentage of the country’s refinery capacity in operation also rose to 89.7 percent from 87.9 percent.

Besides the drop in wholesale gas prices, crude oil also continues its recent decline. The spot price closed Wednesday at $122.30 for a barrel of West Texas intermediate, the U.S. benchmark. That’s down $1.99 a barrel from the previous day and down $10.27 from its high of the year set on May 21  The price declines, which should affect markets nationally, were initially overshadowed in the Kansas City area by the fire in Kansas City, Kan., which threatened to roil the local market. 

The fire was at a major wholesale terminal at 401 E. Donovan Road owned by Magellan Midstream Partners, which has about 38 above-ground storage tanks.  Lightning is thought to have struck the fuel tank Tuesday evening. The 145,000-barrel tank held about 29,000 barrels of gasoline — or about 1.2 million gallons — at the time it ignited. The gasoline in that tank was of a type not intended for the Kansas City area but for other markets with different blend requirements. In addition to gasoline, the facility handles commercial jet fuel, ethanol, diesel and other types of fuel oil.  Kansas City, Kan., fire officials originally estimated that the fire, which was being allowed to burn out, would be over by Wednesday afternoon, but pockets of fuel were causing the fire to last longer. A revised estimate of when the fire would be out was not given.

Kansas City, Kan., Deputy Fire Chief Kevin Shirley said part of the tank’s floating roof remained on top of the pool of gas, preventing it from burning off as quickly as they had expected. The Magellan petroleum terminal is one of four in the Kansas City area. The others remained open, including one owned by ConocoPhillips that is less than a mile from the Magellan facility.  Magellan determined Wednesday that it was safe to use the facility’s loading racks and the fuel in other tanks that were not affected by the fire. At 3 p.m. the racks were opened, and five bays quickly filled with tanker trucks that each could hold about 8,000 gallons of fuel.