Gulf Refinery Recovery Could Take Weeks; Fuel Prices Rise

Print

Published on September 1 2017 9:30 am
Last Updated on September 1 2017 9:30 am

BY DAN GRANT

The torrential rains from Hurricane/Tropical Storm Harvey finally relented after inundating parts of Texas and Louisiana.

But, with more than twice the annual average rainfall at some locations in just a matter of days, it could take weeks or even months to fully assess the damage and begin the recovery process.

Fuel prices, as a result, could continue to climb this month as about one-quarter of oil refinery capacity in the Gulf Coast was offline, along with eight refineries in Texas.

Futures prices, as of Thursday, were up 45 cents for gasoline and a dime for diesel fuel, compared with the previous week.

“The general effect of the storm will be huge because of all the rainfall hitting a major refining area,” Jackie McKinnis, GROWMARK senior analyst of energy/refined fuels/ and propane, told FarmWeek. “Just getting people to work again is going to be a big challenge until all the water recedes.”

The massive storm not only shut down refineries, it also forced the closure of the Colonial Pipeline, which moves petroleum to the southeast U.S.

“There’s plenty of crude (oil) around,” McKinnis said. “The problem with the pipeline is there’s not enough product to push it through.”

Oil prices actually fell to a six-week low earlier this week, to $45.96, due in part to reduced demand, before rebounding.

The flooding, particularly in the Houston area, cut gasoline demand by about 150,000 barrels per day, according to some estimates.

“Luckily, we have a surplus of (oil) in the U.S. We’ve been able to take advantage of that,” McKinnis said. “And, in Illinois, we’re lucky to have three refineries in the Chicago area. We should be in good shape.”

Fuel prices, as a result, increased about 20 cents at the pump, but remained somewhat in check compared to the degree of devastation along the Gulf Coast.

Nationwide, prices averaged $2.45 per gallon for regular gasoline, up 23 cents from the same time last year, and $2.56 for diesel, up 20 cents, according to the AAA Gas Price Tracker.

Fuel prices could continue to tick up this month until refinery capacity is restored. Petroleum imports also are expected to arrive in the U.S. later this month.

“For the (fall) farming season, people should have bought (fuel) already, but it’s not too late to go ahead and fill,” McKinnis said.

The analyst noted propane prices barely edged higher. A buildup of product in the Midwest, due to the inability to export propane because of shipping terminal closures along the Gulf, actually could benefit farmers in the Corn Belt.