Hurricane Harvey has wreaked havoc on Texas and Louisiana, dumping up to five feet of rain on some areas in a matter of days, subsequently killing at least 35 people, destroying thousands of homes and businesses and displacing countless people as waters keep rising in some areas, while finally receding in others.
The epic storm has also caused the shutdown of about 25% of U.S. oil refineries accounting for about 4.4 million barrels per day in capacity, putting pressure on oil prices because of subdued demand, while sending gasoline prices soaring. To that point, gasoline prices swelled to their highest level in over two years, topping $2.00 per gallon.
Gasoline for September delivery shot ahead over 13% in Thursday action to $2.147; that’s the highest price since June 2015 and largest one-day gain in about over 17 months.
Due to September contracts expiring today, trading in other future contracts, namely October experienced higher volumes, although with lower volatility, suggesting traders think the spike will be short-lived.
With more refineries closing on Tuesday and Wednesday, market participants were met with the news on Thursday that Motiva Enterprises’ refinery in Port Arthur, Texas, the biggest refinery in the country, could be paralyzed for up to two weeks. A more succinct time frame of the shutdown won’t be available until an assessment of the property is completed.
While Motiva can’t provide an exact time for a restart, it did pledge to donate $500,000 to support disaster recovery efforts in Houston and Port Arthur. Additionally, the company says it will match employee contributions as part of its internal-giving programs.
Lending to the pressure on gasoline prices, Colonial Pipeline Co., which already shut down its facilities outside Lake Charles, Louisiana said it is temporarily suspending service of its pipeline carrying gasoline from Houston to Linden, New Jersey. The major pipeline operator said it will only resume using the pipeline once it knows its facilities are safe for operation.
AAA Texas reported that the average price for gasoline across the U.S. was $2.45 on Thursday, up a dime from the prior Thursday and five cents from Wednesday.
With the Labor Day weekend on the horizon, pundits suspect that prices may continue to rise, depending on any positive developments from the crippled South.
