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Tempers fray as NY fuel crunch deepens, relief days away

By David Sheppard and Suzanne Barlyn

NEW YORK (Reuters) - The fuel supply crisis gripping the New York area deepened on Thursday as the city's iconic taxis started turning away business while drivers searched hours for a tank of gas, and there were growing signs that the worst of the crunch is not over.

Long, increasingly ill-tempered lines of motorists snaked through New York and neighboring New Jersey, snarling traffic as motorists hunted for the few service stations still operating in the wake of the devastating storm Sandy. Less than half of the thousands of stations in the region are open, officials said.

With major refineries, fuel terminals and oil pipelines still out of service three days after Sandy, and demand picking up as normal life resumes, the situation is getting worse instead of better.

More than 4 million homes and businesses remain in the dark. The need to find fuel for generators has led to competing lines of people clutching red gasoline canisters at gas stations across the region.

Corey Hill, a 40-year-old plumber, said he'd traveled for 10 hours through Queens and Brooklyn trying to find gasoline. A long line was waiting as technicians tried to fix a generator at the service station on the border of the two boroughs.

"I have people with emergencies waiting on me, but if I can't get gas I can't get to my customers," Hill said.

"I got a little gas at one place, but it was a fight. The roads are a disaster. I rolled the dice and came out here after I heard they we're starting up."

In New Jersey, a state known for its vast refining and oil storage network and low gasoline taxes, less than 40 percent of the 2,944 gas stations monitored by motoring group AAA had both power and fuel. In New York City, as few as a third of the stations were able to sell fuel for one of two reasons.

"If they have product, they don't have power; and many, if they have power, don't have any product," said Ralph Bombardiere, executive director of the New York State Association of Service Stations and Repair Shops.

One line at a Hess station on 44th Street and 10th Avenue in Midtown started an entire avenue over on 11th. A separate line going straight down 10th Avenue ran for three blocks, creating gridlock on the key thoroughfare.

The most immediate remedy arrived in the familiar form of oil-tank trucks, which were driving as far as Delaware City - three hours south - to pick up fresh fuel, according to PBF Energy, whose two refineries emerged unscathed from Sandy.

But those 8,000-gallon dispatches are likely to be too few and far between to make much of a difference in a region that is still short of nearly half its normal gasoline, diesel and heating fuel supplies after Sandy's destructive tear.

Even after power is restored to the vital network of oil storage and import terminals and a key pipeline, it will take time for operators to conduct the necessary safety checks and resume normal operations, said Credit Suisse oil analyst Jan Stuart. Meanwhile the region faces a supply shortfall of an estimated 1.2 million barrels per day (bpd) out of its typical daily demand of 2.8 million barrels of gasoline, diesel and jet fuel.

"People have been talking about this being a matter of days, but in some cases it might well take weeks," he said. Credit Suisse's downtown Manhattan offices are currently powered by generators.

So far there have been few reports of higher gasoline prices or gouging, but officials have warned that prices may rise if supply in the region does not improve soon. The average price of gasoline in New York was $3.927 a gallon according to AAA, down 5 cents on the previous week. In New Jersey, where fuel taxes are lower, it was $3.546 a gallon.

NO RIDE FOR YOU

Some commuters hoping to get around with service cars were disappointed. "We've had to cancel a lot of cars today because there's not enough gas," said Joue Balulu, a partner at Fone-A-Car in Brooklyn. "It's affecting everybody. Our drivers have to go out to try and find gas."

At lunchtime on Thursday, the number of cabs operating in New York City was down by around 30 percent on last week, according to the NYC Taxi and Limousine Commission (TLC), despite increased demand with much of the mass transit system still down.

"The priority for fuel is for medical and emergency response vehicles," said Allan Fromberg, a spokesman for the NYC TLC.

"Taxis and other for-hire vehicles face the same challenges that other businesses do in the storm's aftermath."

Fuel supplies are being choked off in several ways: two refineries that make up a quarter of the region's gasoline and diesel capacity are idle because of power outages or flooding; the New York Harbor waterway that imports a fifth of the area's fuel is still partly closed to traffic; Colonial Pipeline, a key conduit from refineries on the Gulf Coast, hopes to resume only limited deliveries on Friday.

But perhaps the biggest problem is getting fuel into the storage tanks and terminals dotted around the Harbor, a critical link in the supply chain used to break down large shipments into smaller batches for shipment inland or loading on trucks.

At least a dozen such terminals accounting for more than a third of the area's 75 million barrel storage capacity were still shut; some lacked power, while others were damaged, raising the prospect of lengthy repairs.

Motiva Enterprise, a joint venture of Royal Dutch Shell and Saudi Aramco, was working to clean up an 8,000-barrel diesel fuel spill after Sandy damaged four storage tanks at its Sewaren, New Jersey, facility, one of the biggest on the harbor. The fuel fouled the critical Arthur Kill Waterway.

The news was bad too from Hess Corp. and Phillips 66, whose refineries just south of Newark remained shut with no estimate for reopening. Phillips 66's Bayway plant, known to oil traders as the 'gasoline machine', was damaged by flooding, a source said.

HINGES ON POWER

Much of the recovery in fuel supplies depends on power supplies, which may take more than a week to fully restore.

Consolidated Edison Inc said on Thursday it would not fully restore electricity to the south end of Manhattan until Saturday, and not for more than a week across the five boroughs.

Power company Public Service Enterprise Group Inc (PSEG) said it would be seven to 10 days before it completed repairs in New Jersey, though it has restored service to more than half of the 1.7 million customers knocked out by Sandy.

The New York City Metropolitan Transportation Authority (MTA), which on Thursday restarted a limited subway service, said it had supplies to keep its buses running and was still getting deliveries to its depots.

Near the entrance to the still closed Holland Tunnel that normally links New Jersey to Manhattan, only one gas station out of six was open. Powered by a generator, the BP site was reserved for emergency service vehicles. Police cars lined the road, turning away any civilian vehicles that tried to enter.

Car traffic coming into Manhattan has been restricted to vehicles carrying three or more passengers until Friday.

Zipcar Inc, a car-sharing company that rents out vehicles at an hourly or daily rate, said members late in returning cars in New York or New Jersey because of traffic or fuel shortages would not face the usual charges.

"Any members who are willing to wait in line for fuel, we're willing to waive any late fees," said Dan Curtin, Zipcar's vice president of fleet operations in Boston.

(Additional reporting by Michelle Conlin, Angela Moon Adrees Latif, Adam Kerlin and Lynn Adler in New York, Melanie Hicken, William Schomberg and Joseph Ax in New Jersey; Editing by Dale Hudson and Claudia Parsons)

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