Hurricane Harvey did more than just damaging the cities in Texas. It also has some serious effects on the energy sector, which can be the biggest test in the industry so far. It took one-third of the U.S. refinery capacity offline for days, leaving the sector to consider the costs of adding infrastructure hardening on the Gulf or moving to a different location. The devastating flooding hit the central hub for energy sectors and exposed a downside: vulnerability to storms.
How did Hurricane Harvey affect the energy sector?
- Closed refineries and offshore crude oil production. The Gulf of Mexico has much of the U.S. refinery capacity and chemical production, which was devastated during the storm.
- Delayed damage assessments. Damage assessments could take days to weeks to complete. Restarts could also be dangerous as fires and explosions may occur.
- Power loss. According to the Electric Reliability Council of Texas, over 300,000 residents were without electricity.
- Increased gasoline prices. The Gulf Coast’s disruption will send gasoline prices upward by as much as 35 cents per gallon over the next two weeks.
- Shutdown of multiple refineries. About 3 million barrels of refining capacity has been taken offline according to a research note by Goldman Sachs. UBS top analyst Wayne Gordon also said that some of the issues around production may be enduring for at least the next month.
- Halted oil production. About 22% of the oil production in the Gulf of Mexico has been terminated, both offshore and onshore.
It could take weeks to fully assess the damage of Hurricane Harvey to the energy sector, but it will be undoubtedly extensive. Prices are likely to shoot up in the coming weeks, and when they do renewable energy sources could get a major lift. So far, oil and gas prices endured because much oil and gas are still in storage around the country when the storm hit and most drivers stay at home.
The energy sector is resistant to change, but the storm is surely a challenge. Check out other blog topics here.