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Tags: new york | gas | pump | prices | hurricane | harvey | texas

New York Gas-Pump Prices May Soar If Hurricane Harvey Ravages Texas

New York Gas-Pump Prices May Soar If Hurricane Harvey Ravages Texas
(Dollar Photo Club)

Saturday, 26 August 2017 12:27 PM EDT

A destructive journey by Hurricane Harvey along the Texas coast would probably leave New York drivers paying more at the pump.

Harvey is hammering U.S. Gulf Coast refineries with winds above 100 miles per hour and torrential rain. About 10 percent of the plants are offline already in the region, which is the primary supply of motor fuels for the eastern U.S.

If more refineries are forced to shut or are damaged, East Coast drivers are likely to see pump prices climb along with Houston’s rising flood waters. One million barrels of strategic stockpiles stored at sites near New York, Boston and Portland, Maine, will only stave off shortages for a day or so. Beleaguered Philadelphia-area refiners may get a shot in the arm from higher profit margins and demand for their fuel.

“There’s not much you can do about it,” said Phil Verleger, president of oil-market consultancy PK Verleger. New Yorkers are “going to look at some high gasoline prices for a couple of weeks,” he said.

The supply situation could mirror what happened after Hurricane Katrina in 2005, which led to a full $1 a gallon increase in wholesale gasoline in New York Harbor, Verleger said by phone.

A similar scenario unfolded in 2008 when Houston was hit by Hurricane Ike, and gasoline prices spiked 45 cents in a day, said Dan McTeague, an analyst with GasBuddy in Toronto. “It wasn’t the actual hurricane that was the concern, it was the timing of how long the refineries were down.” 

Click here for more on Hurricane Harvey

The refineries that line the coast from Corpus Christi, Texas, through western New Orleans produce about one-third of all fuels consumed in the U.S. Fortunately it’s been a good year for gasoline production, McTeague said. Refiners have processed record-high volumes of oil this summer, government data show.

“Extensive flooding can wreak havoc on submerged pumps, motors and switch gear,” said Ernie Barsamian, Chief Executive Officer of The Tank Tiger, a terminal storage clearing house. “A storm surge of five feet can shut down a refinery for a week. A surge of 10 feet can impact a refinery for a month.”

Power failures at refineries, pipelines and terminals may curtail shipments to the East Coast on Colonial Pipeline. The line hauls 1.3 million barrels a day from Houston to the East Coast, about one quarter of the region’s demand. Colonial doesn’t anticipate any issues with its pipelines, spokeswoman Malesia Dunn said by email.

“This could have really long-term disastrous consequences for some parts of the oil system,” Verleger said. “I have this ghastly feeling that we’ve continually not invested enough in U.S. infrastructure, including the Colonial Pipeline.”

During a major supply disruption, the president can tap an emergency gasoline stockpile that was created after Hurricane Sandy caused fuel shortages in 2012. The U.S. Energy Department reserve, which President Donald Trump has proposed eliminating, can distribute up to 1 million barrels of gasoline to Northeast states within two days of a disruption. As of Thursday morning, the agency had not received any requests to release fuel from reserve.

Philadelphia Refineries

Philadelphia Energy Solutions, PBF Energy Inc. and Delta Air Lines Inc., which own refineries in the Philadelphia area, have suffered from lower profit margins than their Gulf Coast competitors. A jump in prices could bolster the argument that the plants are necessary to meet demand in the populous northeast U.S.

Gasoline and diesel distributors would also to turn to imports, which typically account for about 20 percent of the region’s supply. The catch: prices need to be high enough to attract supply from abroad, which can take more than a week to arrive.

The East Coast may have to compete with Mexico for European supply. Mexico has been importing record amounts of fuel from the U.S. Gulf as a fire at its biggest refinery curtailed domestic supply.

New York Harbor would receive barges of fuel from Philadelphia and also tanker imports from Caribbean-based blending terminals or European refiners, Barsamian said. “Locations without waterborne access could find barrels the hard way, via truck from other markets.”

© Copyright 2023 Bloomberg News. All rights reserved.

A destructive journey by Hurricane Harvey along the Texas coast would probably leave New York drivers paying more at the pump.
new york, gas, pump, prices, hurricane, harvey, texas
Saturday, 26 August 2017 12:27 PM
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