Retail US gasoline prices surge as refineries warn of shortages after Harvey

Retail US gasoline prices surge as refineries warn of shortages after Harvey

Retail US gasoline prices surge as refineries warn of shortages after Harvey

Harvey was forecast to come ashore in western Louisiana near the Texas border on Wednesday. It's reduced United States fuel-making capacity by about 4.25 million barrels a day to the lowest since 2010.

"The refineries were built on the Gulf Coast with the idea that we're going to import", said Sandy Fielden, director of oil and products research at Morningstar in Austin, Texas.

Energy Secretary Rick Perry announced Thursday that he authorized 500,000 barrels of crude oil to be drawn down from the Strategic Petroleum Reserve. Texas and Louisiana are home to 45 percent of total USA refining capacity.

Drivers like Wright say those higher prices have put them in a tough spot.

"It will be a while before operations can return to normal and the US refining industry is bracing itself for an extended shutdown", Stephen Brennock of oil broker PVM said.

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While the refineries were shut off as a precaution for the storm, flood damage has occurred at some facilities. As of Tuesday, it changed its destination to New Orleans.

We may not know until daylight in the USA the full extent of the storm's damage so the market is likely to play the waiting game until then with mostly sideways action.

The window for shipping is closing as conditions deteriorate and Harvey moves east towards refineries and ports in the state.

“Last week was a week unlike any other in terms of stress to fuel distribution network. peak month of gasoline demand (August) plus high demand for the eclipse plus the devastation in Gulf Coast and it's a real challenge on the system, ” Lenard said.

The gasoline supply issues could reduce inventories on the East Coast, causing prices to rise further, Zachary Rogers, a refining and oil products analyst at Wood Mackenzie Ltd., told Bloomberg. USA crude CLc1 fell 25 cents to $46.19.

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US West Texas Intermediate crude futures were trading down 0.24 per cent to $46.33 per barrel, while the global benchmark, Brent crude, dipped 0.37 per cent to $51.81 per barrel.

One convenience store in Houston reportedly charged $20 for a gallon of gas, $8.50 for a bottle of water and $99 for a case of water, according to the Texas Attorney General's office.

The figure is expected to drop significantly this week after the impact of Harvey.

"It's not a significant problem at the present time, but it could turn into one", said William Fleischli, executive vice-president of the Illinois Petroleum Marketers Association, which represents 400 fuel distributors. The oil will be delivered via pipeline to the Phillips 66 refinery in Westlake, Louisiana. The company did not immediately respond to requests for comment Monday on the impact of this closure on its output.

The Houston Ship Channel was shut, and the Port of Houston will remain closed on Wednesday.

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It could take two weeks or longer before big refineries in the Houston area can recover from a record-setting deluge and resume normal operations, assuming they didn't suffer serious damage, which is still unknown.

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