Hurricane Harvey Affects Gasoline Production, Pricing

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The Energy Information Administration (EIA) reports that because of the disruption caused by Hurricane Harvey on the major Gulf Coast refineries, capacity is down and prices have, accordingly, risen. EIA reports that the week ending Sept. 1, 2017 saw gross inputs to refineries in the U.S. Gulf Coast falling by 3.2 million b/d, or 34 percent, from the previous week, the largest drop since Hurricanes Gustav and Ike in 2008. Gulf Coast weekly refinery utilization fell from 96 percent to 63 percent (although other areas of the country remained virtually unchanged). As demonstrated graphically below, just over half of all U.S. refinery capacity is located in the U.S. Gulf Coast. In fact, Texas, where Harvey made landfall, represents 31 percent of all U.S. refinery capacity.

The Gulf Coast region is not only center for the refining of petroleum, but also a key storage area for crude oil and petroleum products. As EIA reported, “refinery operations are largely dependent on a supply of crude oil and feedstocks, electricity, safe working conditions, workforce availability, and outlets for production. As a result of Hurricane Harvey, many refineries in the region either reduced runs or shut down in its aftermath.”

Note that crude oil and petroleum product pipelines were also adversely affected by the hurricane, including the major Colonial Pipeline system. Per EIA, “Colonial typically operates at or near full capacity, but as a result of Hurricane Harvey and the decreased supply of petroleum products available to ship, Colonial Pipeline briefly curtailed operations and shipped products intermittently before resuming operations at reduced rates of flow on September 6.” These impacts resulted in the U.S. average regular retail gasoline price rising 28 cents per gallon, from $2.40/gal on August 28, 2017 to $2.68/gal on September 4, based on EIA data. It is too early to tell whether there will be additional impacts from Hurricane Irma, but Florida is not a key center for petroleum refining as is Texas.

Contact ACA’s Allen Irish for more information.