A fifth of U.S. refining capacity is down

More than 20 percent of the nation’s oil refining capacity to churn out gasoline is out of commission after the refining complexes in Beaumont and Port Arthur were shuttered Wednesday as a result of Tropical Storm Harvey’s ongoing deluge.

Four major refining campuses shut down Wednesday, including the Port Arthur Motiva Enterprises refinery, the nation’s largest, adding to the tally of outages that previously occurred during the last six days in the Houston and Corpus Christi areas.

Motiva, which is owned by Saudi Arabia, Irvingbased Exxon Mobil, San Antonio’s Valero Energy and Paris-based Total all closed their refineries in the Beaumont region that process more than 1.5 million combined barrels of

oil a day. The massive Motiva refinery alone goes through well more than 600,000 barrels daily.

The Texas Gulf Coast is home to more than a quarter of the nation’s oil refining capacity, and 22 percent of the overall U.S. supply to make gasoline, diesel, jet fuel and other products is offline because of Harvey. The few Houston-area refineries that remained partially open like Marathon Petroleum Corp.’s Galveston Bay plant are operating at greatly reduced capacities for now.

Overall, that means more than 4 million barrels of daily refining capacity is closed down, and the number could grow if Harvey forces more shutdowns in Louisiana.

Refining analysts are projecting that retail gasoline costs will easily rise anywhere from 25 cents to 35 cents per gallon — and possibly higher — in the near term. While it’s hard to track ongoing price hikes in Houston because flooding is keeping many stations closed, GasBuddy data shows fuel prices in the Dallas area already have jumped by nearly 20 cents a gallon. Texas fuel prices on average are up about 10 cents a gallon in the last week, according to AAA. Some companies already are expecting fuel shortages throughout much of the state ahead of the Labor Day weekend. And Houston-area motorists can expect greater shortages in addition to higher prices for now because of flooding and the challenges with restocking the pumps.

The good news is these outages and elevated prices shouldn’t last for long, said Matthew Blair, a refining analyst with Houston’s Tudor, Pickering, Holt & Co. energy investment banking firm.

“We haven’t heard of any significant structural issues,” Blair said. “It’s mostly just a lot of water.”

This likely translates into outages and elevated prices that last for several weeks, not months, he said.

The U.S. Environmental Protection Agency already has issued waivers on environmental quality for fuel to get more gasoline to market in Texas and other states. And more gasoline imports from Europe and other regions are en route to the U.S. to help relieve the supply crunch, Blair said.

Already, some of the Corpus Christi-area refineries are beginning the process of coming back online, which typically takes a week or so.

Flint Hills Resources, which is owned by Koch Industries, said it initiated its restart process Wednesday and plans to have its Corpus refining complex up and running by about Sept. 6, according to filings with the Texas Commission on Environmental Quality. Valero said it is planning to put its Corpus and Three Rivers refineries back into service soon.

Marathon said its Texas City refinery, which is much smaller than its Galveston Bay sister refinery, should be up by Sept. 13, according to TCEQ. As for the Port Arthur and Beaumont outages, Motiva on Tuesday said it fought to keep the nation’s largest refinery running, at first reducing operating capacity to 60 percent and then to 40 percent before deciding to shut down Wednesday morning.

“Motiva began a controlled shutdown of the Port Arthur refinery in response to increasing local flood conditions,” the company said Wednesday. “Return to service is contingent upon recession of floodwaters in the area. Our priority remains the safety our employees and community.”

Refineries along the Gulf Coast also are hampered by lower amounts of oil coming in from pipelines and reduced operations at nearby terminals and ports.

Likewise, Exxon Mobil shuttered its Beaumont complex after first reducing operations, and Valero’s Port Arthur refinery followed suit as well.

The Total refinery and petrochemical complex in Port Arthur was a slightly different matter. It shut down after a sudden loss of power caused by Harvey, leading to an abrupt closure.