Gasoline price hikes spread to all 50 states within the past week and rose immediately in the aftermath of Harvey as its destruction affected several cities and towns which are home to massive refineries and several pipelines.
The national average price of gasoline increased by 25 cents per gallon to $2.64 per gallon, which is the largest weekly rise since 2005, said Patrick DeHaan, a senior petroleum analyst for GasBuddy.com, a Boston-based provider of retail fuel pricing information and data. After Katrina made landfall, gas prices ascended by 49 cents in just a mere week.
In Texas, two out of the three Port Arthur refineries remained closed and together they refine 1.163 million barrels of oil a day. Motiva refines 603,000 barrels of oil a day while Total's (TOT) plant processes 225,500. Valero (VLO) refines 335,000 barrels and started operations on Monday, according to filings with state environmental regulators.
"The situation is looking much better after Harvey, but definitely not near 100%," he said. "It may take weeks to get back to that level, but many refineries are restarting or already have, while some may have been spared significant damage."
Colonial Pipeline, the largest U.S. refined product pipeline, started the pumping of diesel and jet fuel shipments on its second line from Houston, the company reported Monday and plans to restart gasoline flows from Houston on its first line on Tuesday. Colonial Pipeline, which is a major distributor of gasoline, diesel and jet fuel and starts in Houston, runs through Louisiana and picks up products, then moves to Mississippi, Alabama, Georgia, up to the Carolinas and to Virginia.
Port Arthur is home to 55,427 residents, according to 2016 estimates by the U.S. Census Bureau and is 23 miles from Louisiana and 102 miles from downtown Houston. After Harvey made landfall in Corpus Christi, its impact reached Houston and expanded to Port Arthur, a small town which relies on the refinery industry as a major provider of jobs, last Wednesday. During a period of six days, Texas was plummeted by 27 trillion gallons of water.
"It appears that most of the Gulf Coast refineries, with the exception of the huge Motiva facility in Port Arthur, will be back online within a few days," said Bernard Weinstein, associate director of the Maguire Energy Institute at Southern Methodist University's Cox School of Business in Dallas. "It may be another two weeks before Motiva is up and running."
Refining capacity of gasoline, jet fuel and diesel is still down by 2 million barrels of oil a day while nearly another 1 million barrels is flowing at reduced capacity from partial shutdowns, said Suzanne Minter, director of client strategy and energy solutions at S&P Global Platts, a New York-based provider of information and benchmark prices for the commodities and energy markets. The increase in refining capacity is a marked improvement from last week's major decline and will help relieve supply issues.
"With 2.9 million barrels of oil a day that is still offline that marks 15.5% of overall U.S. capacity, but we went from the peak of the refining capacity in Texas being decreased by 4.1 million barrels of oil a day to only 2 million barrels and that is pretty significant," she said.
A Valero spokesman said its Corpus Christi refinery reached their full operating rate along with Texas City on Saturday but is attempting to resume its Three Rivers and Houston refineries to its previous normal operations.
ExxonMobil (XOM) said its Baytown plant in Texas needs "minor repairs," according to a S&P Global Platts report. The plant refines 560,500 barrels and is the second largest in the country.
If some refineries and pipelines such as Colonial face prolonged shutdowns due to flooding, the long-term impact will be greater, said Minter. The outlook appears positive as the U.S. contributes to 2.2% of global refining capacity out of the 89 million barrels a day global supply.
"The temporary reductions are not indicative of a shortage of global energy," she said. "We're still making the oil. It will be interesting to watch the outcome once the water recedes. Most of the damage is done when units are running and flooding occurs, but refineries shut down production ahead of Harvey."
Gasoline Prices to Dip
Along with the spikes in national prices, shortages at hundreds of gas stations occurred in Texas last week, said DeHaan.
"It's been one of the most challenging weeks faced in years," he said.
Gasoline prices will likely continue to remain elevated until Texas recovers fully from the deluge of Harvey.
"The pinch at the pump was a direct result of Harvey - immense rain flooding refineries, wind and waves closing vital ports, causing massive disruptions to oil refineries, of which over a dozen had to shut down, with it closing over a quarter of the country's refining capacity," DeHaan said. "It was a major disruption to gasoline production, resulting in gas prices spiking across much of the country, with the biggest increases generally east of the Rockies."
There were 18 states which saw prices jump by over 30 cents per gallon versus a week ago and some rose by 42 cents such as Delaware. The smallest increase occurred in 10 states such as Hawaii with a mere two cent rise and three cents in Utah.
Oil prices fluctuated nominally last week while gasoline prices spiked with NYMEX October RBOB futures settling down 3.31 cents per gallon at $1.7479 per gallon on Friday.
Gasoline prices are not expected to surpass new highs as the largest increases are now "behind us," he said. "While prices may tiptoe higher in some states for several more days at least, the national average is likely to peak later this week."
The demand nationally for gasoline dips after Labor Day as people embark on fewer road trips.
Even with the outage at Motiva, the lack of output from the refinery should have "little impact on supply or prices because we've now entered the post-Labor Day season of weakened demand for gasoline, Weinstein said.
Prices should start dipping by the end of next week and consumers should expect to see at least a 10 cent drop, he said.
If Hurricane Irma makes landfall later this week in Florida, there should not be any disruption to the production in the western Gulf of Mexico, said Weinstein.
The impact on prices and supply should be minimal because the branches of the Colonial pipeline which delivers refined products to Florida should not be impacted by the hurricane, he said.
The path of Irma could have less of an impact because Florida is a narrow strip of high value luxury real estate and a lot of open space through the center of the state, said Patrick Morris, CEO of New York-based HAGIN Investment Management.
"Miami is the nightmare scenario at these wind speeds and Ft. Lauderdale would also be a disaster," he said. "I think that at this point it's more troubling to think about it slipping into the Gulf. A second hit to Houston or New Orleans would be a game changer on the Gulf Coast."
Outside of Florida, Irma's landfall would not impact gasoline prices nationally, said DeHaan.
"Florida has very little in the way of energy infrastructure with just system of pipelines connecting Tampa and Orlando," he said. "The supply in Florida may be very touchy due to Harvey, however, disrupting normal flows of gasoline to Florida. If Irma does hit Florida and there are high amounts of evacuations, the situation will be pretty rough.''
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