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U.S. taps reserves to calm New York, New Jersey fuel "panic" post Sandy

People affected by the power outages from Hurricane Sandy wait in a 2hr line at a gas station to purchase fuel for generators in Madison Par
People affected by the power outages from Hurricane Sandy wait in a 2hr line at a gas station to purchase fuel for generators in Madison Par

By David Sheppard and Jonathan Spicer

NEW YORK (Reuters) - A third day of gasoline "panic buying" among storm-stricken motorists in the New York area and New Jersey prompted authorities to tap emergency oil reserves and ordered the military to dispatch fuel on Friday, while limited deliveries from pipelines and oil barges offered a glimmer of relief.

Four days before the U.S. presidential election, the Obama administration made an all-out effort to ease the crisis, authorizing the Defense Logistics Agency to buy and deliver up to 22 million gallons of fuel for the region, waiving a rule barring foreign-flagged vessels transiting U.S. ports and loaning out diesel from the Northeast heating oil stockpile.

New Jersey Governor Chris Christie ordered gasoline rationing starting at noon on Saturday, an action likely to draw comparisons with the 1970s oil crisis.

New York temporarily lifted tax and registration requirements on tankers docking in New York Harbor, which had just reopened to oil vessels. "There should be a real change in conditions and people should see it quickly," New York Governor Andrew Cuomo said.

While the shipping waivers sent benchmark New York gasoline futures 2 percent lower, they will do little to address the immediate obstacle to getting fuel to consumers: power outages that shut two-thirds of the filling stations in New Jersey and the New York City area were still hindering service at oil terminals and refineries in the region.

While the main fuel pipeline from the U.S. Gulf Coast region resumed shipments on Friday and a handful of oil storage terminals began shipping fuel again under generator power, many remained shut. The vast IMTT Bayonne terminal and storage farm, which hosts one-fifth of the harbor's capacity, is due to reopen sometime next week, its co-owner said.

Faced with losing another day of business, William Torrens got up at 5 a.m. in East Rutherford, New Jersey, to queue for fuel. The owner of All Clear Plumbing waited four hours in a six-block line at a Sunoco station before finally getting gasoline for his truck and home generator.

"I haven't seen something like this since I was a kid and there was a gas shortage," Torrens said, adding that the shortage was costing his business money.

"I can't spare a truck to sit for four hours in line. When my guys run out of gas, they're going to have to sit."

In Brooklyn, taxi drivers hunted for fuel. Long lines formed outside even empty stations after rumors spread that they would soon receive fuel deliveries. Officials said the number of cabs on the road by Friday morning was down 24 percent from last week.

By late on Friday, motorist group AAA said that nearly half of all service stations in New Jersey were now open for business, up from 35 to 40 percent earlier in the day, while a smaller number of New York City and Long Island stations had reopened. But the U.S. Energy Information Administration said two-thirds of service stations in the New York City area were still without gasoline for sale.

PRICE GOUGING

Prices at the pump have remained steady despite the shortages, AAA said, averaging just below $4 a gallon in New York City, 2 cents lower than last week. However, on Long Island, where only a third of all stations were working, average gasoline prices jumped 5 cents from a day earlier.

Online, Craigslist users started offering gasoline for as much as $15 a gallon to motorists and homeowners who did not want to brave the lines.

There were some signs that the situation could improve as the complex New York Harbor network of terminals, storage tanks and pipelines was finally returning to service.

Speaking with Governor Cuomo at a press conference, Rear Admiral Daniel Abel of the U.S. Coast Guard said that fuel barges in New York Harbor may be allowed to pump gasoline directly from barges into oil tanker trucks waiting on the dock.

"We're looking at creative alternatives," Abel said. "They (can) hose the fuel directly from the barge to a truck, if they can do that safely."

An oil tanker carrying 2 million gallons of gasoline docked overnight in Newburgh, New York, 60 miles north of Manhattan. Other ships were offloading cargoes in the harbor after being stuck at anchor for the past week.

Colonial Pipeline, a 5,500-mile (8,900-km) network that runs from the Gulf Coast refining center up the eastern seaboard, said late on Thursday that it had resumed fuel deliveries at its facility in Linden, New Jersey, the terminus of the line.

The Federal Emergency Management Agency (FEMA) said the U.S. Defense Logistics Agency would buy up to 12 million gallons of gasoline and 10 million gallons of diesel for the area, while the Department of Energy would lend 2 million gallons of diesel to emergency responders in New York and New Jersey, starting as early as Saturday.

The Environmental Protection Agency extended a waiver on clean diesel fuel rules to cover the New York City area and Pennsylvania, allowing them to use higher-sulfur home heating fuel in generators and vehicles. New Jersey received similar relief from the Clean Air Act rules earlier in the week.

SHORT ON POWER AND PATIENCE

The majority of oil terminals around New York Harbor remained shut without power, while some were damaged in the storm. They have gasoline in their storage tanks, but without electricity they cannot move it to tanker trucks for distribution.

Phillips 66 Bayway refinery in New Jersey, known as "the gasoline machine" by oil traders, may be shut for weeks due to flood damage, a source familiar with operations said. The company has said that a decision on when to reopen would be made "once all assessments are complete." A third of the region's refining capacity was shut by the storm.

Terminal operator Buckeye Partners LP said FEMA was helping to bring power generators to terminals. FEMA spokesman Lars Anderson confirmed in a blog post that the agency was "coordinating with states and the private sector to accelerate the distribution of fuel to retail locations."

Those measures offered little comfort to people waiting in long lines with no guarantee that supplies would last until they got to the front of the line or that enough power would be restored to get more stations open.

Juliana Smith, a full-time student, spent 2-1/2 hours in line to fill two five-gallon containers on Friday, an hour more than on Thursday. "It's psychotic," she said. "People are angry. We have no power. No heat. We need gas for the generator and our Ford Explorer, which is a monster."

There was "panic buying" in the region, Hess Corp Chairman and Chief Executive John Hess said on a conference call.

Travel through tunnels and across the three main bridges to Manhattan was down 47 percent on Friday morning, according to data from the Port Authority.

"This is in part due to the gasoline shortages. It's probably also due to people staying home today - they've really had to fight to get where they want to go over the past few days," said New York Department of Transportation spokesman Adam Levine.

Rumors circulated on social media about which sites had gas or were due to get a delivery.

"I heard it on Facebook," said Manuel Ortiz, 33. He was first in the line of more than 60 people waiting with red and orange gasoline canisters at a station in Brooklyn.

Two police officers placed a blue barrier in front of Ortiz, a delivery truck driver who said he had been waiting since 2 a.m. He said a fist fight had broken out when one driver tried to cut in front of another.

"I just want the gas. I don't care how long I have to wait," said Ortiz.

(Additional reporting by Chelsea Emery and Emily Flitter, Joshua Schneyer and Jonathan Leff in New York, Soma Das in Bangalore; Editing by James Dalgleish, David Gregorio, Dan Grebler and Jim Marshall)

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