The U.S. Department of Energy now says an expected shortage of ultra-low-sulfur diesel fuel and gasoline in the Northeast will not be as bad as initially feared.

In February, the DOE's Energy Information Administration warned that supplies to the region would be significantly strained by the closing of two refineries and the potential closing of Sunoco's Philadelphia Refinery, which was responsible for 24% of the refining capacity on the East Coast.

Since then, The Carlyle Group and Sunoco announced a joint venture that will keep the 335,000-barrels-a-day Philadelphia refinery operating and make upgrades and increase its production. In addition, Delta Air Lines is buying the 185,000-barrels-a-day Trainer, Pa., refinery from ConocoPhillips and plans to restart operations by mid-September.

"With these two refineries in operation, the supply of petroleum products refined in the Northeast region is expected to be much higher than in the scenario EIA considered in its February report, greatly reducing the requirement for additional petroleum products from outside the region," the EIA said.

Back in February, the EIA predicted a potential shortfall of 420,000 barrels a day of gasoline and ULSD. The gap "is now expected to be just 50,000 barrels a day of ULSD, with the gasoline gap disappearing almost entirely," the EIA said.

"Moving about 50,000 barrels a day of additional ULSD to the Northeast should be well within the capacity of existing infrastructure," said the agency. It can be sent from the Gulf Coast, a major center of ULSD production, with the help of a recent expansion of the southern portion of the Colonial Pipeline.

The reason diesel still faces a shortfall is largely because demand is expected to spike following New York's new requirement for ultra-low sulfur diesel fuel instead of traditional home heating oil, which went into effect July 1.

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