• 3 minutes Shale Oil Fiasco
  • 7 minutes "Leaked" request by some Democrats that they were asking Nancy to coordinate censure instead of impeachment.
  • 12 minutes Trump's China Strategy: Death By a Thousand Paper Cuts
  • 16 minutes Global Debt Worries. How Will This End?
  • 5 hours americavchina.com (otherwise known as OilPrice).
  • 30 mins Democrats through impeachment process helped Trump go out of China deal conundrum. Now Trump can safely postpone deal till after November 2020 elections
  • 8 hours Forget The Hype, Aramco Shares May be Valued At Zero Next Year
  • 23 hours Natural Gas
  • 1 hour Iraq war and Possible Lies
  • 13 hours Joe Biden, his son Hunter Biden, Ukraine Oil & Gas exploration company Burisma, and 2020 U.S. election shenanigans
  • 1 hour POTUS Trump signs the HK Bill
  • 2 days Everything you think you know about economics is WRONG!
  • 2 days Wallstreet's "acid test" for Democrat Presidential candidate to receive their financial support . . . Support "Carried Interest"
  • 4 hours READ: New Record Conoco Eagleford Vintage 5 wells, their 5th generation test wells . . . Shale going bust . . . LAUGHABLE
  • 18 hours My interview on PDVSA Petrocaribe and corruption
  • 1 day Aramco Raises $25.6B in World's Biggest IPO
  • 2 days 2nd Annual Great Oil Price Prediction Challenge of 2019
  • 1 day Winter Storms Hitting Continental US
Alt Text

Two Factors To Upend Oil Markets In 2020

While most analysts continue to…

Alt Text

What’s Behind The Bounce In Oil Prices?

Oil prices saw some significant…

Robert Rapier

Robert Rapier

More Info

Premium Content

Harvey’s Long-Term Impact On Oil Markets

The tropical storm formerly known as Hurricane Harvey continues to dump copious amounts of rain on the Houston area. As a former Houston resident who lived there during the massive flooding from Tropical Storm Allison, I don’t think the city has ever seen anything like what it’s currently experiencing.

Houston is the central hub for the energy industry in the U.S. It is important for oil and refined product imports and exports, it is an important storage area for oil and refined products, and much of the Strategic Petroleum Reserve is close by.

There is also some onshore oil production in the general area, and quite a bit of offshore production. But perhaps most importantly, the five largest oil refineries in the U.S. are on the Texas and Louisiana Gulf Coast, and the two largest refineries in the country are in the vicinity of Houston.

As Tropical Storm Harvey continues to cause severe flooding in the Houston area, how might this impact the oil market?

If you consider the relative locations of oil production and oil refining in Texas, it seems the latter will likely experience the worst outages for the longest period of time. Hurricane Harvey made landfall near Corpus Christi, Texas, which is also another major refining center. These refineries didn’t experience the kind of flooding currently being seen in the Houston area, but they did have to shut down as the hurricane approached. They will likely be back up and running at full capacity this week, barring more extensive damage than has been reported thus far. Related: Russia’s Comeback In The LNG Race

The real problem is further up the coast. The Houston-area refineries will likely experience significant flooding, and transportation in the region will be challenging for days. That means not only will the refineries have maintenance issues to deal with, but there will also be personnel issues as employees attempt to deal with their own flood-induced problems.

According to S&P Global Platts Energy, the following refineries were shut down as a result of the storm:

(Click to enlarge)

Refining Capacity Impacted by Tropical Storm Harvey

**Not confirmed

What does it all mean? We may experience the biggest hit to the nation’s energy infrastructure in decades. Following Hurricane Ike in 2008, refinery utilization dropped from 78 percent before the hurricane to 67 percent the week of the hurricane. During Hurricane Katrina, utilization fell from 97 percent to 87 percent. But neither of these hurricanes brought the kind of widespread flooding currently being experienced at the nation’s largest refineries.

The U.S. is going to experience a substantial draw on gasoline inventories this week, and for the foreseeable future. The extent of the draws, and subsequently the spike in gasoline prices, will depend on the level of damage to the refineries and to surrounding infrastructure.

Oil prices are falling because crude oil inventories were in good shape heading into the hurricane and because crude oil production will be less affected by the storm. Offshore production will bounce back relatively quickly, but production in the Eagle Ford (which experienced significant rain) may take a little longer to bounce back to pre-storm levels. Related: Can Mexico Capitalize On This Golden Oil Opportunity?

The bottom line is that for the next few weeks the nation’s refining capacity is going to be substantially curtailed. An estimated 30 percent of the country’s refining capacity has been impacted by the storm. Some of that will likely be impacted for weeks. That means there is going to be a period in which we have too much oil, and too little gasoline and diesel. Ongoing price spikes are inevitable.

But until the rain stops and the damage can be assessed, the long-term impact of the storm remains an open question. The impact will be substantial at a minimum, and it could very well be catastrophic to the U.S. energy sector.

By Robert Rapier

More Top Reads From Oilprice.com:




Download The Free Oilprice App Today

Back to homepage



Leave a comment
  • Brandon on September 07 2017 said:
    Not sure: Harvey had a 10-days impact on refineries, we can assume it to be fully absorbed in one month or so. Hardly any long term spike in gasoline prices will be determine by this storm. Rather, on production side people will start wondering if drilling arctic is maybe less risky.

Leave a comment




Oilprice - The No. 1 Source for Oil & Energy News
Download on the App Store Get it on Google Play