Harvey’s Havoc Drives Up Gas Prices
As Hurricane Harvey battered Texas this past week, dropping more than four feet of rain in some areas, gasoline prices shot up across the country. According to AAA, the national price of gas has risen to $2.519 as of September 1, the highest it’s been in two years. The price spike is the result of a combination of factors, including the shutdown of several oil refineries and pipelines.
“It’s estimated that up to 30 percent of the country’s refining capacity was taken offline by the storm,” said James Greer, vice president of supply and government relations for MFA Oil. “This has put a strain on fuel supply for many areas that depend on pipeline deliveries from refineries located along the Gulf of Mexico, where Harvey did the most damage.”
Harvey has put a major dent in U.S. gasoline production. The Oil Price Information Service estimates 2.5 million barrels of crude oil refining capacity has been temporarily lost due to the storm. Over the weekend, Valero reported its refineries in Corpus Christi and Three Rivers sustained “substantial refinery impacts” and the company is evaluating infrastructure needs to determine when the refineries can resume operations.
“No doubt, Harvey has impacted operations and access to refineries in the Gulf Coast. However, a clear understanding of overall damage at the refineries is unknown,” said Jeanette Casselano, a spokesperson for AAA. “Despite the country’s overall oil and gasoline inventories being at or above 5-year highs, until there is clear picture of damage and an idea when refineries can return to full operational status, gas prices will continue to increase.”
The disruptions at refineries have caused several pipelines to shut down due to a lack of product to pump. The nation’s biggest fuel transporter, Colonial Pipeline, which is the primary supply line for many southeastern states, announced it would shut down until there was enough production to resume operation. The Explorer Pipeline, which carries fuel from the Gulf to Dallas, Tulsa and Chicago, has also halted transport of gasoline and other fuels, but plans to resume shipments this weekend if there is enough refined fuel available from Texas refineries.
Even if the refineries in the Gulf region are able to reopen, production will have to gradually be built back up through a step-by-step process, explained Jack Gerard, president and CEO of the industry group American Petroleum Institute.
“These are large, sophisticated high-tech complexes, and so they do it in phases, if you will. As they graduate from one phase to the next, it typically takes a few days to do so,” he told CNBC’s “Squawk Box” on Thursday.
Greer noted MFA Oil receives the bulk of its fuel from refineries based in Oklahoma and Kansas.
“We have a secure supply line, but some of the fuel from our area is being diverted to Texas and other states to help address supply concerns,” Greer said. “It’s not clear how long prices will remain elevated. Until all the damage has been officially assessed, nobody really knows how long it will take for fuel production to return to normal.”
While the uncertainty regarding the timing of when refineries and pipelines will resume their operations remains, motorists are encouraged to remain calm.