Energy

Harvey, Labor Day Holiday Could Push US Gasoline Prices Higher

Paul Ausick

Published: August 31, 2017 7:55 am

Last Updated: January 12, 2020 8:37 am

Gasoline shortages that can be attributed to tropical storm Harvey will begin to appear in other parts of the United States by Friday, pushing pump prices higher as the Labor Day holiday weekend begins. Traditionally a high travel time, this year many gas station operators are expecting a shortage of supply through the holiday weekend.

Some of the nation’s largest refineries have shut down, including the 600,000 barrel a day Motiva plant in Port Arthur, Texas. Exxon Mobil’s Baytown refinery (capacity of 560,000 barrels a day) is also shut down. The total production capacity of the closed refineries is about 3.04 million barrels a day.

Refineries in Corpus Christi and other areas where the storm has passed are beginning to come back online. Analysts at S&P Global Platts estimate that nine refineries that are returning to service could produce about 50% of capacity, bringing the total reduction in refinery output to nearly 4 million barrels a day, about 22% of total U.S. refining capacity.

Shipments of gasoline by pipeline out of southeast Texas will be reduced, which means that areas along the Atlantic coast and in the Midwest that normally receive these supplies will have to buy from Europe, Africa or Canada, driving up costs and, ultimately, the pump price. The U.S. west coast could see prices spike because supplies will be coming from Europe and from Asia-bound tankers that could be redirected to the west coast.

Gulf Coast ports remain closed to both imports and exports Thursday morning, but Platts reports that the Houston Ship Channel could reopen by the weekend. The port of Corpus Christi is targeting Monday to return to normal operations.

More than 320,000 barrels a day of Gulf of Mexico offshore production was still shut in on Wednesday, about 18.5% of total Gulf daily production. Onshore production in the Eagle Ford shale is being restarted, but how long it takes to return to usual production of around 1.34 million barrels a day is still a question.

A chemical plant in Arkema, Texas, exploded early Thursday morning following a warning from plant officials that the loss of primary electricity and two backup sources had forced the shutdown of refrigeration. Without cooling, vapors built up and the explosion became a matter of when, not if.

One county deputy sheriff was overcome with fumes and several others also went to the hospital to be checked. A Harris County Sheriff’s Office spokesman said the fumes are not considered life threatening.

West Texas Intermediate crude oil for October delivery traded $46.18 a barrel Thursday morning, up about 0.5% from Wednesday’s closing price. Reformulated gasoline blendstock traded up about 2.4% at nearly $1.68 a gallon, up about 10 cents over the past five trading days. The spread between crude and gasoline is about $24.40 a barrel.

24/7 Wall St.
Crude Oil Price Sinks as Inventory Drop Is Offset by Gasoline Stockpile