Deep impact
Harvey could have long-lasting effects on Texas oil, U.S. economy
Massive flooding caused by Harvey along Texas’ refineryrich coast could have longstanding and far-reaching consequences for the state’s oil and gas industry and the larger U.S. economy. The storm’s remnants left much of Houston underwater on Sunday, and the National Weather Service says it’s not over yet: Some parts of Houston and its suburbs could end up with as much as 50 inches (1.3 metres) of rain.
With the heavy precipitation expected to last for days, it’s still unclear how bad the damage will be, but there is already evidence of widespread losses. Key oil and gas facilities along the Texas Gulf Coast have temporarily shut down, and flooding in the Houston and Beaumont areas could seriously pinch gasoline supplies. Companies operating in the Gulf of Mexico have evacuated drilling platforms and rigs, crimping the flow of oil and gas.
Experts believe gasoline prices could increase as much as 25 cents a gallon.
Harvey’s toll on air travel in the U.S. is set to extend into Monday, with the tracking service FlightAware.com reporting that more than 1,400 flights already have been cancelled. That’s in addition to more than 2,000 cancelled over the weekend.
Economy watchers looked to oil futures markets and stock trading in the U.S. Monday for further indications of fallout.
Nearly a third of U.S. refining capacity sits in low-lying areas along the coast from Corpus Christi, Texas, to Lake Charles, Louisiana. Beyond the shutdown of refineries at risk of a direct strike from high winds, there’s the threat of flooding and potential power outages for gasoline supplies.
Refinery outages continued to spread Sunday, with about 2.2 million barrels per day of refining capacity down or being brought down, according to analysts at S&P Global.
Valero Energy Corp., whose two big Corpus Christi refineries escaped damage, said it was working with federal and Texas agencies and its business partners to determine what infrastructure was needed to resume refinery operations.
Even before Harvey hit, the prospect of supply disruptions sent gasoline futures to $1.74 a gallon, their highest level since April, before they retreated to around $1.67 by Friday afternoon. At the pump, experts see gasoline increasing 10 cents to 25 cents a gallon.
Given the strictures faced by the refineries, “This is the dominoes starting to fall,” Patrick DeHaan, senior petroleum analyst for Gas Buddy, said Sunday. “This is sort of slowly turning out to be the worstcase scenario.”
The shipping industry also is expected to be disrupted by the worst hurricane to hit the Texas coast in more than 50 years. Shipping terminals along the Texas coast shut down as the storm approached. Port operations in Corpus Christi and Galveston closed, and the port of Houston said container terminals and general cargo facilities closed around midday Friday. Rates increased for carrying freight between the Gulf and the U.S. East Coast.
More than 1,400 flight cancellations were reported Monday, according to FlightAware.
Houston’s two airports were closed to all flights except those connected to relief efforts. Houston Bush Intercontinental Airport was not expected to reopen Monday until noon at the earliest.
Houston International Airport was scheduled to remain closed until Wednesday morning.
Airlines were offering customers the chance to reschedule trips that would take them to Houston, San Antonio or Austin from Friday through the weekend.