Gas prices rise, flights stall as Hurricane Harvey nears

Posted August 25

— Refinery operators along the Texas Gulf Coast are hunkering down for Hurricane Harvey, while motorists far from the storm's path are also feeling the effects as gasoline prices rise.

Nearly one-third of the nation's refining capacity sits in low-lying areas along the coast from Corpus Christi, Texas, to Lake Charles, La.

Several refineries at greatest risk of suffering a direct strike from high winds have already shut down, but it is the potential for flooding in the Houston and Beaumont, Texas, areas that could really pinch gasoline supplies.

Other industries from shipping to air travel are also seeing the impact of the first major hurricane to hit the refinery-rich Texas coast in nearly a decade.

Here's how Harvey is likely to affect energy, travel, shipping and other industries.

— REFINERIES: The hurricane is expected to make landfall Friday night or early Saturday, but Flint Hills Resources already announced that it would shutter a refinery, and Valero Energy Corp. said it was closing two facilities in Corpus Christi.

Tom Kloza, an analyst for the Oil Price Information Service, predicts that prices could rise by up to 25 cents a gallon, but an increase of 5 cents to 15 cents is more likely, assuming that the hurricane doesn't cause lasting damage to refineries.

Andy Lipow, president of consultant Lipow Oil Associates, expects prices to rise 10 cents a gallon for motorists east of the Rockies.

Gas prices at stations in the Raleigh area were already up 6 to 8 cents a gallon by Friday afternoon.

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"I have seen gas go up from $2.12 to $2.19," said Morris Jones of Kenly. "People just always look for problems and situations to incur profit."

Steve Byers, who owns a convenience store on Lake Wheeler Road in Raleigh, said that, with no nearby refineries, North Carolina is beholden to the Gulf's fuel supply.

"As soon as we find out what it costs us, that's when we put the price on the sign," Byers said. "We've seen the next load we get will be 6 to 7 cents more a gallon, and it all has to do with refining and location."

An Exxon station on Western Boulevard in Raleigh was selling gas for $2.14 Friday morning, but the price had jumped to $2.22 a gallon by the afternoon.

"I've seen the price of gas be real volatile," said Raymond Riggan, who drives for a living and says he gets frustrated when prices climb before a storm even hits. "It doesn't seem fair when that happens, but we do see it when these kinds of things happen."

Flooding and power outages caused by a storm surge are considered the biggest risk.

"The biggest issue is whether Harvey causes major flooding in the Houston area and that shuts down another 13 percent of the nation's refining capacity, which could lead to an additional price spike," Lipow said.

Houston-area refineries wouldn't decide whether to shut down until the weekend, he said.

The prospect of supply interruptions sent gasoline futures to $1.74 a gallon, their highest level since April, before retreating to around $1.67 by Friday afternoon.

AAA expects prices to remain high through the Labor Day holiday, so spokeswoman Sandra Horton said drivers shouldn't panic over prices.

"If they are sitting OK for the next couple of days, I think the best thing they can do is just not rush out and get the fuel," Horton said.

— OIL AND GAS: Companies have been evacuating workers from oil-producing platforms in the Gulf of Mexico, and that is crimping the flow of oil and gas.

As of midday Friday, the U.S. Bureau of Safety and Environmental Enforcement said workers had been removed from 86 of the 737 manned platforms used to pump oil and gas from beneath the Gulf.

The agency estimated that platforms accounting for about 22 percent of oil production and 23 percent of natural gas output in the Gulf had been shut down.

"Supplies might tighten up, but if the storm stays on the south end of the supply chain, that will help," said Gary Harris, executive director of the North Carolina Petroleum and Convenience Marketers Association.

"We could see more production be taken offline in the Gulf of Mexico" if the path of the storm wanders farther east, said Jenna Delaney, an oil analyst for PIRA Energy, adding that oil companies announced fewer platform shutdowns on Friday than they had on Thursday, which she called an encouraging sign.

"It depends on the storm, but there's certainly the possibility of at least short-term supply disruptions," said David McGowan, executive director of the North Carolina Petroleum Council.

Exxon Mobil closed two of its platforms and was evacuating all personnel in the expected path of the storm, said spokeswoman Suann Guthrie. Shell halted operations on a big floating oil-production platform, and Anadarko evacuated workers and shut down four facilities in the western Gulf while continuing to operate those east of the storm's predicted path.

On shore, ConcoPhillips stopped all operations in the Eagle Ford shale formation, which lies across a swath of South Texas inland from the Gulf. A company spokeswoman cited safety and potential disruptions in getting oil and gas from the wells to market during the storm.

— SHIPPING: Shipping terminals along the Texas coast shut down as the storm approached. Port operations in Corpus Christi and Galveston closed, and the port of Houston said container terminals and general cargo facilities were closing around midday.

Rates for carrying freight between the Gulf of Mexico and the U.S. East Coast rose.

— TRAVEL: All flights out of Corpus Christi for the rest of Friday were canceled early in the day. Anyone with weekend travel plans that include a swath of Texas from San Antonio to Houston should check with the airline to see if the flight has been canceled.

American Airlines Flight Tracker: Any flight, any airport

American Airlines hoped to resume flights in Corpus Christi on Saturday, but Southwest and United scrubbed all flights until Monday, according to an airport official.

Around midday Friday, dozens of flights to and from Houston airports were also canceled, and conditions were expected to worsen over the weekend. About one-third of all Saturday flights have already been canceled at Hobby Airport, where Southwest is the dominant carrier. A Southwest spokeswoman said the airline expected to run a full Houston schedule on Sunday.

Airlines were offering customers the chance to reschedule without penalty trips that would take them to Houston, San Antonio or Austin from Friday through the weekend.

— UTILITIES: Researchers at Texas A&M University estimated that the storm will knock out power for at least 1.25 million people in Texas. They said the hardest-hit areas will include Corpus Christi, which is on the coast, and San Antonio, which is about 140 miles inland.

— INSURANCE: A firm that does forecasts for insurance companies says wind-damage claims could top $6 billion, although it says that losses in the low billions are more likely.

Risk Management Solutions Inc. said losses from storm surges and inland flooding could be a bigger source of losses. If the firm is correct, that would put homeowners and the government-backed National Flood Insurance Program at risk.

The flood program is run by the Federal Emergency Management Agency, which owes the Treasury about $23 billion in funds borrowed to cover the cost of past disasters, according to a recent report by the U.S. Government Accountability Office.

Homeowner policies with insurance companies don't typically cover flood damage, yet a relatively small percentage of homeowners have flood insurance through the federal program.


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