Harvey shuts 24% of refining capacity in US; Brent down

Harvey shuts 24% of refining capacity in US; Brent down”

In a story August 28 about the effect of Tropical Storm Harvey on the economy, The Associated Press reported erroneously that USA daily refining capacity is 18 billion barrels per day. The $50 level above could be targeted eventually, but it's not until the refineries open that we will see that.

Motiva's massive Port Arthur refinery, the No. 1 refinery in the US that is controlled by Saudi Aramco, began a controlled shutdown early Wednesday due to "increasing local flood conditions".

"The average cost of gasoline for store owners in our area has gone up around 5 to 10 cents since Wednesday", said Eric Taylor, general manager for Blair-based Taylor Oil, which owns and operates 7 Taylor Quik Pik stores surrounding Omaha and supplies fuel to six other gas stations.

Arizona's average price per gallon has risen by 2 cents to $2.28.

"Retailers can either go out of business or pass their costs along", said Tom Kloza, director of global energy analysis at the Oil Price Information Service. That assumes they didn't suffer serious damage, which is still unknown.

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 USA a year ago.

Refineries in Europe and Asia were already gearing up to replace the lost oil products, while the International Energy Agency said it could release emergency oil stocks in the event of extended outages.

Refineries in the Houston and Corpus Christi areas shut down before the storm hit Friday to minimize damage. "If there is prolonged flooding and severe weather, we would not be surprised if at its peak 2.5-3.0 million bpd (if not a bit a higher) of throughput is shutdown", Cheng said.

U.S. petrol futures were up 5.5 percent at $1.8810 a gallon, having hit $1.9140, the highest since July 2015.

Gas hit a 2-year high as the dollar dropped on a lack of guidance from Fed Chair Janet Yellen at the weekend's Jackson Hole conference. Downtime is a negative for the refining industry, but better margins would more than compensate for the effect. "It could be a week if not longer before Corpus Christi is at normal operations". The company earlier shut production at its Baytown, Texas, refinery, the nation's second largest.

It is also unclear how much damage has been done to critical energy infrastructure and how long it will take to return to full capacity.

Even once the refineries are running, pipelines and ports are needed to carry their gasoline, diesel and other fuels to consumers.

Precision Drilling CEO Kevin Neveu, who splits his time between Alberta and Texas, said his house in the Houston suburbs is dry so far but flooding has damaged the homes of at least five of his company's 300 Houston-area employees.

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