The havoc wrought by tropical storm Harvey began to spread well beyond the Houston area on Thursday as the damage to the US’s energy infrastructure sent the price of petrol sharply higher and forced Washington to step in to prevent fuel shortages. Almost a week after the storm first made landfall in Texas, almost a third of US oil refineries — many of which are clustered on the US Gulf Coast — have been affected by the storm and refineries still in operation in the region are struggling to import crude because of outages at port facilities. As fears of cholera and typhoid increased in flooded parts of Texas, medical officials alerted the public over the dangers from contaminated water.
White House officials, meanwhile, warned against price gouging on goods. “Anybody that’s going to go out and try to take advantage of a disaster victim ought to expect the law enforcement to come down [on] them with a hammer,” said homeland security adviser Tom Bossert. “That’s not acceptable on a regular day. It’s certainly not acceptable when people are suffering.” US petrol futures were particularly rattled by Wednesday night’s announcement by Colonial Pipeline that it was shutting down the key artery carrying fuel from the Gulf coast refining hub to the East Coast, in a move that could drastically restrict petrol and diesel flows to some of the biggest cities in the US. North Carolina governor Roy Cooper on Thursday declared a state of emergency which will allow petrol to move through the state more quickly in response to delivery problems.
Colonial said it hoped to make “intermittent” deliveries from points on the line east of Lake Charles, Louisiana, but was unlikely to have the line fully operational from Texas before Sunday. On Thursday, US wholesale petrol spiked 13.5 per cent to close at $2.14 a gallon, a two-year high and up by more than a third from levels before the storm struck, meaning motorists will probably face acute price increases at the pumps in the coming weeks. “A lot of fear is driving the trade right now,” said David Leben, director of oil products trading at BNP Paribas in New York.
“It’s the biggest intraday move [in petrol] many people have seen in this market.” Ole Hansen, an analyst with Saxo Bank, said more than 3m barrels a day of crude oil are being left in tanks because of the disruptions at Gulf coast refineries, with at least 13 forced to close or reduce run rates, including the nation’s largest. The Saudi-owned Motiva refinery in Port Arthur, Texas — which can process 603,000 barrels a day of crude, more than any other plant in the country — could be shut for up to two weeks due to flooding, Reuters reported on Thursday.
Pipelines delivering crude from the Permian basin, the largest US shale field, to refineries in Texas have also been closed since the weekend. In a sign of the mounting supply troubles, the US Department of Energy on Thursday authorised the release of 1m barrels of crude oil from its Strategic Petroleum Reserve (SPR) to Phillips 66’s refinery in Lake Charles, Louisiana, following a request from the company. The SPR is the largest government-owned emergency crude stockpile in the world, and was established in the aftermath of the Arab oil embargoes of the 1970s. The biggest short-term issue, however, is likely to be a lack of refined fuels rather than crude.
The International Energy Agency, which co-ordinates releases of government-held fuel stocks in the event of major disruptions, said it believed the US had plentiful petrol and diesel inventories to ride out current supply issues. An emergency fuel release by member countries was not yet necessary, the IEA said, with the market so far functioning to start moving petrol and diesel to where it is needed, including a flotilla of tankers heading to the US from Europe.