As Hurricane Harvey blasted Texas, gas prices shot up across the country. At $2.37, today’s national gas price average is four cents more expensive on the week and one of the largest one-week national gas prices surge seen this summer.
- Vermont’s average current price is $2.38 per gallon, which is the same price as one week ago, and 3 cents higher than one year ago.
- New Hampshire’s average current price is $2.29 per gallon, which is 1 cent higher than one week ago and 15 cents higher than one year ago.
- Maine’s current price is $2.38 per gallon, which is 2 cents higher than one week ago and 15 cents higher than one year ago.
- Massachusetts current price is $2.34 per gallon, which is 1 cent higher than one week ago and 18 cents higher than one year ago.
About one quarter of oil refining capacity in the Gulf Coast had been taken offline, according to forecasts by Oil Price Information Service (OPIS). That equates to about 2.5 million b/d. Harvey also caused eight refineries in Texas to shutdown, including: ExxonMobil Baytown (584,000 b/d), Deer Park (340,000 b/d), Pasadena Refining (115,700 b/d) and Phillips 66 Sweeny (260,000 b/d) in the Houston region, while several others are operating at reduced rates. In Corpus Christi, Flint Hills (304,000 b/d); Valero (300,000 b/d); CITGO (163,500 b/d) and Valero Three Rivers (91,000 b/d) remain offline since initial shutdowns began in advance of Harvey late last week. Over the weekend, Valero reported its refineries in Corpus Christi and Three Rivers sustained "substantial refinery impacts" and the company is evaluating infrastructure needs to determine when the refineries can resume operations. Corpus Christi is connected via pipeline to refineries in San Antonio and Nixon, TX, which can supply Corpus Christi if local refiners are offline for an extended period.
“No doubt, Harvey has impacted operations and access to refineries in the Gulf Coast. However a clear understanding of overall damage at the refineries is unknown,” said Dan Goodman, manager of public affairs for AAA Northern New England. “Despite the country’s overall oil and gasoline inventories being at or above 5-year highs, until there is clear picture of damage and an idea when refineries can return to full operational status, gas prices will continue to increase.”
On Sunday, Magellan Midstream Partners suspended all inbound and outbound refined products and crude oil transportation services on its pipeline systems in the Houston area. Conversely, the Colonial Pipeline said its Gulf Coast pipeline and terminals are continuing to operate normally. The Colonial Pipeline delivers gasoline from Houston to the Mid-Atlantic.
Harvey is expected to continue to impact the region through the middle of the week with an additional 15 – 25 inches of rain expected over the middle and upper Texas coast through Friday.
To help alleviate the tight and potential shortage of supply, the Environmental Protection Agency (EPA) announced over the weekend that it will waive environmental standards on gasoline for select counties in Texas.
“As in any national or local state of emergency, AAA expects gas prices to be held in check up and down the gasoline supply chain, including prices set by refiners, distributors and dealers unless there is a clearly justifiable reason for an increase,” added Goodman.
Oil market dynamics
At the end of last week, the price per barrel of West Texas Intermediate remained below $50 – settling at $47.87. On Monday morning, prices began to fall as news of refinery closings due to Tropical Storm Harvey began to influence the market. Refinery closings signal that less oil will likely be consumed as catastrophic flooding persists in the region, and assessments of damage to energy infrastructure assets are stalled until conditions improve. All of this uncertainty has made the market jittery.
EIA data released last week showed that crude oil inventories dropped by an additional 3.3 million bbl. The continued decline in crude oil has been largely tied to strong refining operations as gross inputs refineries across the U.S. have topped 17 million b/d every week going back to mid-April. However, this trend could change due to refinery closures and reduced operations due to Harvey. As the emergency situation evolves, refiners in other regions, additional imports and alternative transportation routes may be needed to fill any gaps in meeting demand during the aftermath of the storm – all of which could tighten supply and add extra costs to getting gasoline to the pump.
Moreover, according to Baker Hughes, Inc., active oil rigs are down by four, standing at 759 as of last week. Fewer active rigs -- coupled with crude oil output being currently reduced by more than 21 percent in the Gulf of Mexico due to the storm -- could be a recipe for oil prices to jump throughout the week. However, any price jumps will be linked with matching demand estimates, which could signal a dramatic decline based on the storm.
It is still too soon for the market to know how badly damaged energy infrastructure is from the storm, but the coming days will offer more insight into how long recovery and restoration may take. Demand shifts based on the storm and countermeasures the market will take to meet a new supply and demand landscape will also be evaluated.
Motorists can find current gas prices along their route with the free AAA Mobile app for iPhone, iPad, and Android. The app can also be used to map a route, find discounts, book a hotel, and access AAA roadside assistance. Learn more at AAA.com/mobile.
As North America’s largest motoring and leisure travel organization, AAA provides 57 million members with travel, insurance, financial, and automotive-related services. Operating 19 offices throughout Maine, New Hampshire and Vermont, AAA Northern New England is a not-for-profit, fully tax-paying corporation and a leader and advocate for the safety and security of all travelers. Today, AAA members benefit by roadside assistance, insurance products and services, travel agency, financial products, automotive pricing and buying programs, automotive testing and analysis, trip-planning services, and highway and transportation safety programs. Information about these products and services is available by visiting www.AAA.co