Gasoline prices went up in the United States after Hurricane Harvey knocked out refining operations and traders gauged damage to the Houston area in preparations for a possible shortage in gasoline supplies. Harvey hit Texas at the end of last week as a Category 4 hurricane, the strongest to hit the US state in more than 50 years, but it has now been downgraded to a tropical storm. Markets are now concerned that Harvey could hit Louisiana and cause damage to fuel-making plants that could take weeks or months to fix.
Harvey has disrupted almost 15% of the US refinery capacity since Monday morning (28 August) and the number is going up. Exxon Mobile said that its 362,300 barrel-a-day refinery in Beaumont, Texas, is operating at lower rates. The total amount of refining capacity disrupted by the hurricane could go up as high as 30%, if Harvey moves toward Louisiana. “There are so many things that are left up in the air here,” said Tariq Zahir, managing member of Tyche Capital Advisors.
Volatility in energy markets had picked up on Thursday (24 August) when Harvey was upgraded to a hurricane and encouraged traders to step up their bets. As the storm got stronger over the weekend, the possibility of the lasting damage has added to the frenetic trading.Harvey struck the heart of the US oil infrastructure with the Texas coast being home to almost a third of the country’s refining capacity. For example, Exxon Mobil’s Baytown plant, the second biggest in the country, ended up with a floating roof and if it sustains more damage, it could add up to its downtime significantly.
