The floods devastating Houston are not likely to have a significant impact on the energy industries of Wyoming, though they could depress the price of crude in the short term and push up gas prices in some regions of the country.
Tropical storm Harvey was moving a sedate 3 miles per hour Monday across Texas. The Houston area, an epicenter of the nation’s oil and gas industry, may receive as much as 50 inches of rain over the course of the storm, which touched down on the Texas coast as a category 4 hurricane Friday.
Close to 3 million barrels a day of refining capacity was confirmed to be shut down as of Monday, according to the Department of Energy. With between 12 and 15 percent of the country’s ability to turn crude into gasoline offline, prices at the pump are expected to rise, said Bruce Hinchey, president of the Petroleum Association of Wyoming.
“I think the refiners are the ones hurt more than production,” Hinchey said of operations down in Texas. “There is going to be a lack of supply for areas … Hopefully, we’ve got enough (gas) to go around.”
But that impact on gas prices is not likely to spread as far as Wyoming. It will hit the southeast, which already sees some of the lowest gasoline prices in the country, said Rob Godby, director of the University of Wyoming Center for Energy Economics and Public Policy.
Additionally, the peak season for travel and fair-weather construction, when high gas demand pushes up prices at the pump, is nearing its end, he said.
“Typically at this time of the year, prices fall. That will moderate any impact,” Godby said.
Conversely, the price of crude, already too low for Wyoming’s needs, could go down thanks to Harvey’s rampage across Texas and the lack of refining capacity on the Gulf Coast.
“West Texas oil futures fell as the market expects that refineries will demand less oil as they take weeks, maybe longer, to come back on line,” said Phil Flynn, senior market analyst for Price Futures Group of Chicago, in an investor brief Monday.
The U.S. benchmark price fell 2 percent the first day of the week, closing at $46.80.
With the center of the nation’s energy industries under water, many are waiting out the storm before they can assess damage and long-term impacts. Both the Independent Petroleum Association of America and the American Petroleum Institute declined to comment at this time.
“Admittedly, it’s too early to assess the potential lasting impact that Hurricane Harvey may have on crude oil and refined product markets,” the investment bank Raymond James wrote in an industry brief Monday morning. “Overall, each refining company will tend to benefit (at least from a margins, earnings, and stock price perspective) from periods of disruption like this, even if they have assets affected.”
As the city of Houston and surrounding areas transition to recovery mode in the weeks ahead, some believe the impact on the energy industry at large will be cushioned by other factors, including the already low price of gas at the pump, a glut of crude and, to some degree, overstock of refined products like gas.
There’s also the slow moving nature of the storm which allows markets to adjust and companies to regroup, said Godby, the UW economist.
“Firms are going to be taking hedging moves to lock in prices just in case the worst actually happens,” he said.
The storm itself is the chief unknown as Harvey moves toward Louisiana, the economist said.
Many are certain that the fallout of the storm will be significant given its historic, and as yet, unquantified damage.
“The heart of the US energy industry will face challenges unlike anything they have seen,” wrote Flynn of Price Futures. “And it could be months or years before we get back to normal.”