Hurricane Harvey’s potential impact on Texas Gulf Coast

August 25, 2017 By and    

All eyes are on Hurricane Harvey, now a Category 2 hurricane, which is bearing down on the Texas Gulf Coast, where the nation’s largest concentration of refineries is located.

Harvey is expected to be a Category 3 hurricane when it makes landfall, which would make it the most powerful hurricane to hit the United States since Hurricane Wilma hit Florida in 2005. It is expected to make landfall late Friday or early Saturday. The storm is expected to pack 125 mph winds, create a storm surge of 12 ft. and drop up to 35 in. of rain on parts of Texas. Neighboring Louisiana, also home to many refineries, could get 15 in. of rain.

All of the rain has the potential to damage much of the nation’s refining capacity, which has gasoline and diesel prices surging.

U.S. oil companies have shut down 10 percent of the Gulf of Mexico’s crude production and 15 percent of its natural gas production in preparation for the storm. Onshore drilling activity near the Texas coast has been suspended, as well. The greater impact will likely be to refining, which has gasoline prices up 10 percent since Wednesday. Citgo, Valero and Flint Hills Resources are all in the process of shutting down refineries near Corpus Christi, Texas.

As you can see in the map above, Hurricane Harvey is expected to turn sharply to the northeast after making landfall. That puts a huge percentage of the nation’s refining capacity in its path, making it vulnerable to flooding and power outages that could cause problems for days or even weeks.

The table above lists the refineries with the potential to be impacted by Harvey. Collectively, they represent 29.17 percent, or 5,413,806 barrels per day, of the nation’s refining capacity.

It is unlikely that all of this capacity could become idled due to the storm. However, even if a portion of it does, it will reduce refinery throughput, which would be bearish for crude prices and bullish for refined fuels.

The storm could also affect propane supply from these refineries, as well as natural gas processing plants. Even Mont Belvieu, Texas, could potentially be impacted by this storm if it takes the northeastern path. This path would actually put it close enough to the shore to gain more energy and intensify again. At this point, we have to hope the storm continues on a more northwestern path, which would cause it to lose energy faster and threaten less of the nation’s energy. If Harvey were to take a more northwestern path once making landfall, it has far less potential to cause human suffering and negative economic impacts. Unfortunately, that is not the current prediction.

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