Hurricane Harvey is expected to lead to modest gasoline price hikes across the U.S., a top oil analysts says, though further increases are possible if ongoing rain and flooding in the Houston area inflict additional damage on refineries.
“There were fears this could be a Katrina-like event,” says Tom Kloza, global head of energy analysis for the Oil Price Information Service. “This is not a Katrina like event.”
Refineries in the Houston and Corpus Christi areas shut down before the storm hit Friday to minimize damage. Kloza expects Corpus Christi refineries to reopen within two to three days. Less certain are the effects on the Houston area, where 30 to 40 inches of rain is expected.
“We just don’t have a history for that,” he says. While Houston area refineries appear to have withstood the brunt of the damage so far, he says, much will depend on the impact from the continued downpours and how quickly power outages are repaired.
Nationally, regular unleaded gasoline averaged $2.36 a gallon Sunday, up from $2.35 Saturday and $2.33 a week ago.
Kloza says fallout from the hurricane could push up prices another 5 cents to 15 cents next week as a surge in Labor Day holiday demand collides with the pullback in supply. Pump prices that normally would fall 25 cents after Labor Day instead will likely stay elevated through September before dropping, he predicts.
Darrin Newsom, senior analyst with DTN, expects lingering damage to refineries to push up gasolineprices more sharply, by 15 cents to 20 cents a gallon or more.
About a third of the nation’s refining capacity is located in the Gulf Coast region. Helping limit price gains is that the Environmental Protection Agency has waived requirements for refineries to make cleaner, summer-blend of gasoline because of the storm, Kloza says.
Moody’s Analytics estimates the storm will result in about $5 billion in lost economic output and $5 billion to $10 billion in property damage, similar to Hurricane Matthew, which barreled into the southern U.S. last year. By contrast, Katrina, which slammed into the Gulf Coast in 2005, caused about $140 billion in total losses, including property and economic activity.
Harvey is “disruptive but the region’s economy will quickly overcome it,” says Mark Zandi, chief economist of Moody’s Analytics. About half the property damage should be covered by insurance, with the rest picked up by state and federal government aid.