Gasoline future prices jump,
Closure of 10 refineries as tropical storm continues to drench Texas will also affect costs in Canada
CALGARY— Canadian gasoline prices are expected to rise this week after widespread flooding from tropical storm Harvey forced many refineries on the Texas Gulf Coast to shut down.
Wholesale gasoline prices in the country will likely rise by an average of two to four cents per litre by Thursday, said GasBuddy senior petroleum analyst Dan McTeague, but consumers in certain markets could see much higher price increases.
McTeague explained that retail operators in markets such as Calgary, Montreal and Ottawa are barely breaking even now and could use the wholesale price increase as an excuse to raise prices by as much as another 10 cents per litre to boost profit margins.
“Traders are taking a wait-and-see approach and I think that’s really why you’re going to see very little, for now at least, in the way of any major spikes until at least Thursday or Friday,” he said.
Canadian gasoline prices shown on GasBuddy.com were little changed on Monday.
U.S. prices are expected to spike over the next week or more as about10 refineries representing more than 15 per cent of the nation’s refining capacity are closed, including ExxonMobil, Shell and Phillips’ 66 operations.
When water recedes, prices will fall more slowly than after other storms that hit the refinery-rich Gulf Coast, such as with Hurricane Ike in 2008, said Rick Joswick, an analyst with S&P Global Platts’ PIRA Energy.
Nearly three billion barrels of the 18 billion U.S. daily refining capacity has been knocked out. Most of the shutdowns have been precautionary, with only a few reports of minor flooding.
But the slow-moving nature of the storm means it could cause shutdowns to linger and leave more-lasting damage, said Goldman Sachs analyst Damien Courvalin.
“The damage could worsen if continued rains extend the flooding,” agreed BMO Capital Markets economist Sal Guatieri.
Meanwhile, Canadian companies with assets in the Gulf Coast area joined their American counterparts in closing offices and hunkering down to wait out the storm.
Precision Drilling CEO Kevin Neveu, who splits his time between Alberta and Texas, said his house in the Houston suburbs is dry so far, but flooding has damaged the homes of at least five of his company’s 300 Houston-area employees.
“Our number one priority right now is make sure our employees are safe and
“Traders are taking a wait-and-see approach and I think that’s really why you’re going to see very little, for now at least, in the way of any major spikes until at least Thursday or Friday.” DAN MCTEAGUE GASBUDDY SENIOR PETROLEUM ANALYST
sound and their houses aren’t damaged,” he said from Precision’s Calgary headquarters.
“Number two priority is to watch the civil infrastructure and see how that responds. When the streets are safe and the power is up and running and gasoline is available, that’s when we’ll expect people to start coming back to work.”
He said Precision’s main Houston offices and three field support operations are closed, but 10 drilling rigs in the “rain zone” along the Gulf Coast are contin- uing to operate. Calgary-based pipeline company Enbridge, which bought Houstonheadquartered Spectra Energy earlier this year, says it has closed its Houston offices and removed all but essential staff from its natural gas gathering and processing facilities in the Gulf of Mexico.
“We will continue to actively monitor the storm to determine if further actions are needed,” spokesperson Suzanne Wilton said.