When meteorologists merely project a hurricane’s path across an area that produces large quantities of oil and natural gas and has a large refining capacity – like the Gulf of Mexico – consumers ultimately see an increase in gasoline prices due to precautionary shutdowns. If the actual path of a storm wreaks havoc, the end result is a sharp spike in prices.
According to the Department of the Interior’s Bureau of Safety and Environmental Enforcement, at the peak of the storm about 22 percent of the Gulf’s oil production and 26 percent of its natural gas production had been shut in, equating to approximately 379 thousand barrels of oil and 827.89 million cubic feet of gas per day. Since then, wells have steadily come back online, decreasing the production impact.
The Gulf area is also home to about one-third of the nation’s capacity for refining oil products. Within Harvey’s path, S&P Global Platts has tracked 11 refineries that have been shut down, reducing processing capacity by 2.33 million barrels of oil per day. Additionally, S&P tallies seven plants with reduced production rates, reducing capacity by 1.03 million barrels per day.
AAA spokesperson Jeanette Casselano noted that, “Spikes in pump prices due to the effects of hurricanes tend to be brief but dramatic.” Less than a week after Harvey made landfall, AAA has reported an increase in the national average gas price to about $2.37, one of the largest surges this summer over such a short timeframe. Analysts are predicting that gas prices may continue to increase between five and 15 cents across the country in upcoming weeks.
As Harvey continues to cause problems in Texas, refineries begin to evaluate the damage inflicted on their facilities. Until the full impact is known and refineries can return to full operations, the ultimate end effect on gas prices is unknown.