Will Oil and Gas Prices Rise After Hurricane Harvey?
After wreaking havoc in the southern United States, the effects of Hurricane Harvey will continue to linger for quite a while. And this is not limited to affected states as oil and gas prices are expected to rise due to the shutdown of Texas' Gulf Coast.
Due to catastrophic flooding, at least 10 oil refineries have shuttered in the Houston and Corpus Christi areas. Given the huge importance of Texas' oil refineries to the country, the disruption will likely be felt by many.
Already, gasoline prices have increased in the wake of the devastating hurricane. Wholesale prices of gasoline have risen as much as 5 percent in futures, the highest since July 2015.
According to the U.S. Energy Information Administration, the Gulf of Mexico amounts to nearly a fifth of the United States' total crude oil production. Additionally, the Texas Gulf Coast accounts for a third of the country's oil refining capacity.
Another contributor to the price hike is the closure of the Houston shipping channel. According to Phil Flynn of The Price Futures Group, even if some of the refineries resume operations, it would be difficult if not impossible to move their product.
The price increase may not be felt by consumers for at least a week and may not last very long. However, it is still to be seen how it will affect the overall U.S. economy given a heavy reliance on oil. With the uncertainty of when the oil refineries will come back online, the United States' energy challenges could potentially end up worse than previously thought.
While the impact of previous hurricanes such as Sandy and Katrina were undeniably devastating, Harvey is expected to be the costliest due to Houston's economic importance. With complete damage assessment still yet to be made due to flood waters, the full extent of the hurricane's impact has yet to be seen.
