Harvey's Impact on U.S. Oil Refineries, Prices

Source: Forbes

Tropical Storm Harvey, formerly Hurricane Harvey, has been hammering away at southeastern Texas. It has been referred to as a once-in-a-500-year storm due to its severe wind speeds and ample rainfall, which has resulted in disastrous flooding and devastation to the area.

Texas is home to many oil refineries and the Houston area, specifically, houses two of the largest in the United States. Several refineries are closed down as they wait out the storm for safety purposes while the Houston area refineries are closed due to damages. The storm's relentless rain and flooding has caused road closures and delays in repairs as employees and maintenance workers can’t get on-site to get them back up and running.

These damages affect you and me because the U.S.’ energy infrastructure hasn’t been damaged this badly in years. Oil prices have spiked hitting a two year high since the refineries closed. Texas is capable of producing 5.6 million barrels per day of refining capacity. The chart below shows how almost 2.2 million barrels per day are offline as a result of Harvey.

That doesn’t include the offline capacity in Louisiana whose refineries are also closed because of the storm. Olivier Jakob, managing director of Petromatrix, said "If (U.S.) refineries shut down for more than a week; Asia will need to run at a higher level, because there's no spare capacity in Europe."

Sources: Forbes and CNBC