When it comes to U.S. oil, Hurricane Harvey couldn’t have hit in a worse location.
The area is home to America’s two largest oil refineries and many smaller ones. The storm shut down more than 30 percent of this country’s refining capacity.
It’s pushed gasoline prices higher. Prices at U.S. pumps are up between 5 and 30 cents a gallon.
CGTN America’s Karina Huber reports.
Yet prices for crude oil are headed in the other direction. There is less demand from the refineries that turn crude into gasoline and diesel fuel. That’s driven oil prices down.
“It would be fine if we could export those barrels as they sit around doing nothing, basically,” said Robert Yawger, Director Energy Futures, Mizuho Securities. “However, our biggest export facilities are in the Gulf—the area that was affected by the hurricane.”
With so many refineries out of commission, production has stopped for around a million barrels a day of U.S. gasoline and diesel fuel – much of it destined for Mexico.
The U.S. energy boom created by hydraulic fracturing, or fracking, has made the world increasingly dependent upon the United States for its refined petroleum products.
Mexico relies on the U.S. for almost three-quarters of its gasoline demand. Nevertheless, its state-owned oil company says it can handle the drop in supply from the U.S.
In a statement, PEMEX said: “Fuel supply in the country is guaranteed as there are sufficient inventories of gasoline and diesel.”
Energy trader Robert Yawger said if there’s a shortage, Mexico can also import petroleum products from Europe at a higher price.
“It really couldn’t have happened almost at a better time. Global stockpiles of product and crude oil are elevated. They’re at one of their highest levels of all time,” said Yawger.
For this reason, the International Energy Agency sees no reason to release emergency stockpiles now to make up for the disruptions. But if the shutdowns continue for a protracted period, gasoline prices could continue to rise and that could have negative repercussions for the global economy.
Carl Larry discusses the impact Tropical Storm Harvey has on the oil industry
CGTN’s Rachelle Akuffo spoke with Thomson Reuters Commodities Market Specialist Carl Larry about the impact Tropical Storm Harvey is having on the oil industry.