Harvey hits refineries, stopping nearly one-quarter of US fuel output

Hurricane Harvey has forced a number of refineries in Texas and Louisiana to slow or stop operation, resulting in increased gas prices across the nation.

First Look

The heart of the United States energy industry suffered further damage overnight from Tropical Storm Harvey, and supply constraints could last for weeks with nearly one-quarter of US fuel output knocked out.

The Beaumont/Port Arthur area in Texas, where several large refiners are located, has seen more rain in the last 24 hours in than any other part of the region since the storm began late last week, according to David Roth, meteorologist at the US Weather Prediction Center.

Harvey's disruption of the petroleum industry has driven gasoline futures prices up nearly 17 percent over the past week.

A total of 4.2 million barrels of US refining capacity has been shut by Harvey, nearly as much as the nation of Japan consumes on a daily basis, based on company reports and Reuters estimates.

The latest shutdowns, carried out on Tuesday evening and on early Wednesday, were in Port Arthur, and included the nation's largest refinery.

"The continued increase in flooding creates high uncertainty on the amount of damage that US refineries will incur, the pace at which the shutdown will reverse and the magnitude of capacity that will be impaired over the next few months," Goldman Sachs analysts wrote in a note.

In addition to the refining outages, shale production has been sharply curtailed in the Eagle Ford region of Texas.

Major pipelines carrying gasoline and diesel fuel to Midwest and East Coast markets have been either throttled back or shut entirely.

Gasoline futures were up 6.5 percent early on Aug. 30, due to deepening concerns over a fuel shortage that has also pushed retail prices up across the nation and particularly in the US South and Southwest.

Overnight the AAA said retail gasoline prices were up to $2.404 per gallon of regular gasoline nationwide, a six-cent increase from a week ago. Some states, like Georgia, have seen prices rise as much as 12 cents.

Valero Energy Corp's 335,000 barrel per day (bpd) Port Arthur, Texas, refinery was shut on Wednesday morning, while Motiva Enterprises' 603,000 bpd Port Arthur, Texas, plant, the largest US oil refinery, shut Tuesday.

More refinery closures could come as the storm has made landfall in Louisiana, which has 3.3 million barrels of refining capacity. The Gulf accounts for nearly half the nation's total refining capacity.

There were faint signs of relief in Corpus Christi, where Valero's Three Rivers refinery was preparing to resume operations.

Restarts following a storm are often the most dangerous times for refiners, though the Corpus area received much less rain than the Houston metro area.

This story was reported by Reuters.