Hurricane Harvey is sending pump prices higher for USA motorists and causing temporary shifts in the flow of oil and gasoline around the world after taking down a huge chunk of us refining capacity.
Kloza says fallout from the hurricane could push up prices another 5 cents to 15 cents next week as a surge in Labor Day holiday demand collides with the pullback in supply.
“No doubt, Harvey has impacted operations and access to refineries in the Gulf Coast, ” AAA spokeswoman Jeanette Casselano said Monday. Others were seen operating at higher rates in order to boost profitability by meeting supply shortages. The fall was in line with the market’s expectations. Helping limit price gains is that the Environmental Protection Agency has waived requirements for refineries to make cleaner, summer-blend of gasoline because of the storm, Kloza says. One reason is that there are ample stockpiles of gas, which helps compensate for the loss of Gulf Coast refineries.
Goldman also said around 1.4 million bpd of crude production was disrupted, equivalent to 15 percent of total US output.
The long-term effects of damage to refineries and infrastructure such as ports is not known yet but short-term prices are headed higher.
Traders in Europe and Asia were working to reroute cargoes to the United States and Latin America to fill the gap left by refining and shipping closures in the Gulf. Diesel futures advanced slightly to $1.6657 a gallon, having touched the highest since January at $1.7161 earlier in the session.
“As of August 29, we estimate USA refining production offline was 4.1 million barrels per day (bpd); this represents 23 percent of total USA refining production”, Goldman Sachs said in a note to clients.
While many market participants are still trying to gauge the extent of the damage done to infrastructure in Houston, analysts said further rainfall could keep refining capacity offline longer than some expect.
Moody’s Analytics estimates the storm will result in about $5 billion in lost economic output and $5 billion to $10 billion in property damage, similar to Hurricane Matthew, which barreled into the southern US a year ago. “In addition, the situation could worsen should more shutdowns or outages happen in the coming week as Harvey continues to drop feet of rain on already flooded Texas”.
Other Port Arthur refineries also shut overnight, including Total’s plant, where sources familiar with operations said they expected water to recede by the weekend.
A major pipeline supplying the East Coast with gasoline remains shut down – partly because with refineries closed, there is nothing to ship, but also because of damage in at least three areas.
“In terms of product price increases, it might get worse before it gets better”, said Rob Smith, an energy analyst with IHS Markit.
The coast took a step forward and a step back on Wednesday.
Harvey has battered the U.S. Gulf coast since last Friday, ripping through Texas and Louisiana at the heart of the U.S. petroleum industry. Some analysts argue this shutdown might offset excess U.S. oil capacity, and could temporarily push up oil and gasoline prices.
They added that they would expect about 10 percent of what is now offline would stay shut for several months. FGE estimates that flooding may slash gasoline demand by about 150,000 barrels per day.
Gasoline futures (RBc1) gained 7 percent on Wednesday alone. The slump reflects less demand for oil due because of the refinery shutdowns.
Meanwhile, Harvey caused the price of oil to tumble 2.4% on Monday to $46.75 a barrel.