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Global Energy Advisory 1st September, 2017

Hurricane Harvey has taken out about a quarter of the United States’ crude oil refining capacity, after the country’s biggest refinery, Motiva’s Port Arthur facility, began shutting down Wednesday. This has caused gas prices at the pump to soar - and the soaring is far from over. Investment bank analysts are warning that the effects of the disaster will continue to be felt for at least two months.

Daily gasoline demand in the U.S. is about 9.7 million barrels, while refinery output of the most popular fuel has dropped to less than 8 million bpd. Fortunately, there is about 230 million barrels of gasoline in stock, so a large-scale shortage is unlikely. Temporary shortages, however, might occur in certain parts of the country as a number of pipelines carrying fuels from the Gulf Coast refineries to other parts of the U.S. shut down or operate at reduced capacity as a result of damage from the storm.

Heavy rains continue, which will slow down the recession of the floods that were one big reason for the refinery shutdowns, meaning the adverse effects of the hurricane will be felt for longer before everything goes back to normal. For plants in the Houston area, for example, it may take more than two weeks to resume normal operations and that’s with minimal damage from the storm. The good news is that some refiners, namely Valero and Citgo, said they are already trying to restart operations.

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