Gas prices surge in Harvey’s wake
Gasoline prices surged Thursday as the remnants of Hurricane Harvey continued to disrupt refineries and pipeline operations, causing fuel shortages throughout Texas.
No gasoline shortages were reported in Oklahoma, but local fuel prices have climbed as some local gasoline has been diverted across the Red River.
Wholesale gasoline prices jumped almost 26 cents a gallon Thursday while the average retail price in Oklahoma added almost 6 cents a gallon overnight.
“If you’re looking out the windows and seeing the refineries — these tools that are supposed to be creating gasoline — are not working, that’s why the market has reacted and the price has gone up,” GasBuddy analyst Allison Mac said. “There is a reserve, but it takes time to move that around. We’re not going to run out of gas. This is not an oil issue, and there are other refineries in this nation, but we are going to suffer some from prices going up.”
The country’s gasoline stockpiles contained 23.7 days worth of fuel last week before the storm landed, according to the U.S. Energy Information Administration. But that storage is not all in the areas where the fuel is needed now, and infrastructure outages because of Harvey have made it more difficult to move gasoline to where it is needed.
Environmental Protection Agency rules also require different blends for different parts of the country, making it more difficult to move gasoline from one region to another. The EPA on Wednesday waived those rules. The waivers allowed Oklahoma refineries to send fuel to Texas.
“It was a quick effort on EPA’s part, and I’m impressed with how quickly that happened,” Chad Warmington, president of the Oklahoma Oil and Gas Association, said of the waivers. “It allows us to get gasoline down to Texas. The Alabama and Mississippi oil and gas associations also have called us to coordinate sending supplies.”
‘The bottleneck isn’t with oil’
U.S. Energy Secretary and former Texas Gov. Rick Perry said Thursday he is releasing 500,000 barrels of oil from the country’s Strategic Petroleum Reserve to help alleviate supply disruptions. The largest disruption, however, is with gasoline, not oil. Crude oil production has been reduced in the south Texas Eagle Ford, but is still strong throughout west Texas, Oklahoma and the country’s other oil producing regions.
“The bottleneck isn’t with oil,” GasBuddy’s Mac said. “It’s a refinery issue. All of this oil
needs to be refined. I don’t see that (the release from the Strategic Petroleum Reserve) as making a huge impact on prices.”
While production has been reduced in the Eagle Ford, damage in the country’s second most active oil field appears to be less than feared, Chesapeake Energy Corp. executive Frank Patterson said.
“We were fortunate the Eagle Ford didn’t receive as much water as it could have,” said Patterson, Chesapeake’s executive vice president of exploration and production. “Operationally, we’re getting things lined up, but it comes down to the supply chain. Where does that oil and gas go? It all flows back to where the devastation is.
“We also have a lot of our people affected. We want to make sure our people manage their families first, business second.”
Corpus Christi refinery operators said Thursday they have begun the process of restarting operations and should be running by early next week. Many Houstonarea refineries, however, still are under water.
“Once the water goes down and the refineries go back up, we should see prices drop,” Mac said. “We are heading into winter months where demand is slower, and we’re switching to lessexpensive winter blends. All those factors will drive prices down once refineries are up.”
Wholesale gasoline prices, which does not include taxes and other costs applied at the pump, jumped 26 cents, or almost 14 percent, Thursday to close at $2.14 a gallon, up 47 cents from before the hurricane struck land last week.
Domestic benchmark West Texas Intermediate crude oil prices gained $1.27, or 2.8 percent, to $47.23 a barrel Thursday, marking its first gain this week.