U.S. gasoline futures have rallied more than 28 percent to a two-year high above $2 a gallon, buoyed by fears of a fuel shortage days ahead of the U.S. Labor Day weekend's traditional surge in driving. The national average price of gasoline has started to rise, as major refineries in the Houston area have shut down.
But much energy infrastructure remained off line, including the largest USA refinery, the 603,000 bpd facility in Port Arthur, Texas, owned by Motiva Enterprises LLC [MOTIV.UL]. The storm's impacts sent gasoline prices soaring but also crimped demand for crude.
Expect to pay 20 cents or more for a gallon of gas over the next several weeks - or even months - as the petroleum industry hustles to get the sprawling array of refineries back in action after the devastation wrought by Hurricane Harvey, Texas energy analysts say.
So the issue isn't how much oil is available, it's converting that oil to gas and diesel in the Gulf Coast region.
At least two East Coast refineries have run out of gasoline for immediate delivery as they scrambled to fill barges for markets normally supplied by the Gulf Coast, two refinery sources said. Some Texas refineries could be back online as early as the end of this week, while refineries near the Texas/Louisiana coast are operating at reduced rates.
Energy Secretary Rick Perry and President Trump have chose to put hundreds of thousands of gallons of petroleum into the USA oil supply.
The oil market outside the United States remains well supplied with ample production by the Organization of the Petroleum Exporting Countries.
The U.S. Department of the Interior's Bureau of Safety and Environmental Enforcement said that roughly 13.5 percent of oil production in the Gulf of Mexico was also shut in on Thursday.
Harvey was forecast to come ashore in western Louisiana near the Texas border on Wednesday.
Valero Energy Corp., Flint Hills Resources and most recently Venezuela's Citgo said they would be restarting refineries in Corpus Christi, where operations were threatened when Harvey first hit Texas.
In other words, Harvey has disrupted about one-fifth of the country's total refining capability.
The U.S. exported more than 25 million barrels of crude oil and refined petroleum products from Mexico in May, 23 million barrels from Venezuela and 4 million barrels from Brazil. Total SA's refinery in Port Arthur is out with a power loss, a person familiar with that plant said. "There are refineries in China that depend on USA crude oil". The Colonial pipeline, which transports huge amounts of fuel from the gulf coast to NY, was out of service in the Texas refining hubs of Houston and Port Arthur.
All of this means there is a lot less supply of gasoline, leading to higher gas prices.
One problem: this emergency reserve only holds about 1 million barrels of gasoline, meaning it can only meet the region's enormous appetite for gas for a short period.