Har­vey knocks out more oil re­finer­ies

The Register Citizen (Torrington, CT) - - BUSINESS - By David Koenig AP Busi­ness Writer

DAL­LAS » Hur­ri­cane Har­vey is send­ing pump prices higher for U.S. mo­torists and caus­ing tem­po­rary shifts in the flow of oil and gaso­line around the world after tak­ing down a huge chunk of U.S. re­fin­ing ca­pac­ity.

It will be days or even weeks be­fore the en­ergy sec­tor in the south­east Texas Gulf Coast is back to nor­mal op­er­a­tions as it deals with flood­ing in the af­ter­math of Har­vey, which has been down­graded to a trop­i­cal storm. The re­gion from Cor­pus Christi, Texas, where Har­vey made land­fall, to the Louisiana state line ac­counts for about 3 per­cent of the U.S. economy and is a cru­cial ex­port mar­ket for oil and chem­i­cals.

Wed­nes­day brought news that the na­tion’s big­gest re­fin­ery, which was al­ready run­ning be­low half-speed, had be­gun a com­plete shut­down. The Mo­tiva En­ter­prises plant in Port Arthur, Texas, run by a unit of the state-owned oil com­pany of Saudi Ara­bia, was the lat­est domino to fall among Gulf Coast re­finer­ies.

With that, gaso­line fu­tures headed higher for a third straight day. By af­ter­noon, they had climbed 9 cents to $1.87 a gal­lon.

Re­tail prices climbed, too, up 2 cents on Wed­nes­day and 7 cents in the past week, to a na­tional av­er­age price of $2.42 per gal­lon, ac­cord­ing to Gas­buddy.

“In terms of prod­uct price in­creases, it might get worse be­fore it gets bet­ter,” said Rob Smith, an en­ergy analyst with IHS Markit.

It could take two weeks or longer be­fore big re­finer­ies in the Hous­ton area can re­cover from a record­set­ting del­uge and re­sume nor­mal op­er­a­tions. That as­sumes they didn’t suf­fer se­ri­ous dam­age, which is still un­known.

Har­vey isn’t the first big storm to hit the re­fin­ery-rich Gulf Coast, but the oil in­dus­try has un­der­gone big changes since the last ma­jor in­ter­rup­tion from Hur­ri­cane Ike in 2008.

The so-called shale rev­o­lu­tion has led to a surge in oil pro­duc­tion in the U.S., in­creas­ing the na­tion’s ex­ports of crude oil and gaso­line to Mex­ico and other places in Latin Amer­ica and diesel to Europe.

When the U.S. can’t pro­duce enough gaso­line or diesel to meet ex­port de­mands, other re­gions are forced to look for re­place­ment sup­plies “and the back­fill has to come from fur­ther away,” said Richard Joswick, an analyst with S&P Global Platts. “It has to come from Asia even.”

The re­sult will be higher prices, but it should be just a one- or two-week prob­lem, Joswick said.

Pa­trick DeHaan, an analyst for Gas­Buddy, pre­dicts that U.S. gaso­line prices will top out around $2.50 or $2.55 a gal­lon, an in­crease of up to 20 cents since Har­vey hit, with big­ger spikes closer to the Gulf.

The re­cov­ery from Har­vey will mimic the storm’s path from west to east. Flint Hill Re­sources’ re­fin­ery in Cor­pus Christi, where Har­vey made land­fall as a Cat­e­gory 4 hur­ri­cane, could be­gin to restart — a process that takes days — as early as Wed­nes­day. Other re­finer­ies in the area are likely to do the same later this week.

“It takes some time to start up a re­fin­ery un­der nor­mal cir­cum­stances, and it wouldn’t be sur­pris­ing if they run into hic­cups,” said Smith, the HIS Markit analyst. “It could be a week if not longer be­fore Cor­pus Christi is at nor­mal op­er­a­tions.”

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