Hurricane could impact gas prices

Prices at the pump haven't budged much - yet.

The national average reached $2.37 on Monday - one of the largest one-week national gas prices surge seen this summer, according to a news release from AAA.

The price of gasoline in MA is up two cents this week.

Flood waters are ravaging Houston, the fourth-largest city in the US and the rain just keeps on coming.

Even before the Harvey made landfall late Friday, dozens of oil and gas platforms had been evacuated. In the Wichita area, major gas station retailers boosted per-gallon prices from $2.29 to $2.49 in many locations today.

How long we'll see higher prices, he says, really just depends on how long refineries are down. Patrick DeHaan, senior petroleum analyst at GasBuddy, said the national average could climb as much as 10 cents a gallon this week, followed by another gain of 5 to 10 cents next week. Due to shut down of the refineries along the Gulf Coast, the gasoline prices on Labor Day weekend could jump up more than ten percent.

What's causing gas prices to rise?

The term refers to the differential in crude oil prices and the price of gas products that refineries are able to churn out.

The recent arrival of Hurricane Harvey in Texas and Louisiana has affected local fuel production and distribution, along with regional demand.

Those increases are not due to a lack of supply in the region, however, as Idaho gets most its oil from Wyoming and is refined in Salt Lake City.

More than one-fifth of US refining capacity has been shuttered, according to S&P Global Platts.

In other words, Harvey has disrupted about one-fifth of the country's total refining capability. This, along with the suppression of domestic demand amid the devastation, explains the weakness of USA crude oil prices and adds a little strength to some worldwide grades like Brent. Valero also announced the shutdown of its Port Arthur refinery on Wednesday afternoon. "That is predicated on a quick turnaround for the refineries that are offline". "It could be a week if not longer before Corpus Christi is at normal operations".

As I wrote here, though, the changes wrought by the shale boom mean the effects on energy markets are more nuanced than a decade ago, when a strong hurricane virtually guaranteed leaping oil and gas prices.

On the oil side, the USA remains a net importer of about five million barrels a day. "So the sooner that all the refining capacity and all the refineries there get back online the better".

Precision Drilling CEO Kevin Neveu, who splits his time between Alberta and Texas, said his house in the Houston suburbs is dry so far, but flooding has damaged the homes of at least five of his company's 300 Houston-area employees.


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