As residents of Texas continue to deal with the aftermath of Hurricane Harvey, the effects of the storm are starting to reverberate across the country in the form of higher prices at the gas pump.
Now reduced to tropical storm status, Harvey continues to cause issues for the gas and energy sector, as refineries in Texas begin to reopen for business.
Closures Amid The Storm
According to the Interior Department’s Bureau of Safety and Environmental Enforcement, as of Sunday nearly 22% of oil production in the Gulf of Mexico was shut down. That equates to a reduction of about 378,000 barrels of oil each day, about 5% of the national output.
This, coupled with the closure of at least 10 refineries in Houston and Corpus Christi, means that gasoline prices will rise, just in time for the busy Labor Day travel weekend. Plants operated by some of the largest fuel producers, including Shell, Phillips 66, and ExxonMobil were closed Sunday, according to S&P Platts, which noted that these specific plants combine to produce more than a million barrels each day.
S&P Platts estimated on Sunday that 2.2 million barrels of refining capacity was shut down during and following the storm.
“You’re knocking out a significant portion of production with one event,” Kathy Hall, executive editor of PetroChem Wire, told the Washington Post.
Supply And Demand
When the refineries are out of operation, those barrels aren’t produced, and less gasoline makes it on the market and to your local filling stations.
As a result, gasoline futures — the wholesale prices charged to gas stations — were up 5% on average Monday, a small decrease from a peak of 7% over the weekend when the storm hit Texas.
While 5% might not seem like a huge increase, it represents the highest futures in more than two years.
“The pop in gasoline prices is an immediate response to the closure of refineries on the U.S. Gulf Coast,” Matt Smith, director of commodity research at ClipperData, tells CNN.
What’s This Mean For Your Wallet?
The gas crunch after Hurricane Harvey has resulted in higher prices at most fuel pumps across the country. However, the added expense varies by location.
Overall, GasBuddy reports that regular unleaded gas prices are up about $0.02 from yesterday’s average, but $0.05 from last week’s average.
Compared to this time last year, however, the price is up $0.16.
GasBuddy executives warned of the impending price increases shortly before the hurricane hit Texas, noting that the storm could lead to long-term issues in terms of gasoline supply for large portions of the country.
The company estimates that gas price increases could linger for one or two weeks after the storm.
The timeline seems to fit with previous hurricanes, as analysts tell CNN that gas prices peaked within two weeks of previous hurricanes like Katrina, Rita, Ike, and Isaac, when prices jumped as much as $0.80.
Those costs tend to decline just as quickly as they increase, analysts note.