Hurricane Harvey swamped gasoline production capacity in the Texas Gulf Coast, triggering spikes in fuel prices as the energy-rich region reels from ferocious flooding.
Although long-term damage may be limited, short-term outages at gasoline refineries have temporarily shuttered more than 10% of the nation’s refining capacity, according to data from JBC Energy and Goldman Sachs.
With rain continuing to pummel the Houston region, U.S. motorists are likely to experience an increase of up to 25 cents per gallon in some areas, experts say.
The national average price of gasoline was $2.36 Monday, up nearly 4 cents from a week ago and up 15.4 cents a gallon from a year ago, according to AAA’s daily report. But at the wholesale level, prices along the Texas Gulf Coast are spiking.
GasBuddy.com petroleum analyst Patrick DeHaan projected retail increases of 10 to 25 cents per gallon in the Gulf Coast region, 10 to 25 in the Upper Midwest, 10 to 20 cents in the Northeast, 5 to 15 cents in the Plains and 5 to 15 cents in the Rockies and West.
“I think the worst of the impact is going to start trickling down to the retail level in the next couple of days,” DeHaan said. “The storm is going to be dumping rain for days yet, so we don’t necessarily have a full comprehension of the amount of damage that’s taking place.”
A drop in gasoline demand in Texas is likely as locals in the populous region stay off the road, slightly limiting the potential increases.
But refineries typically responsible for “well over” 2 million barrels of gasoline per day were offline as of Monday morning, according to JBC Energy analysts. That’s more than a tenth of the nation’s capacity of about 18 million barrels per day.
“It is unclear when restarts can begin or whether more severe damage will become apparent at some plants — this will be partly a function of how much precipitation arrives over the coming hours,” JBC said.
The storm has also slashed production of more than 380,000 barrels per day of crude oil, leading to slight increases in the global price of oil.
To compensate for the lost production from refineries in Texas cities like Houston and Corpus Christi, some U.S. energy traders are seeking gasoline imports from refineries in north Asia.
About a third of the nation’s refining capacity is located in the Gulf Coast region, including areas east of Texas.
Oil Price Information Service analyst Tom Kloza said price increases have been limited somewhat by the Environmental Protection Agency’s decision to waive requirements for refineries to make a cleaner, summer blend of gasoline.
Moody’s Analytics estimated the storm would result in about $5 billion in lost economic output and $5 billion to $10 billion in property damage. By contrast, Hurricane Katrina, which slammed into the Gulf Coast in 2005, caused about $140 billion in total losses, including property and economic activity.