HOUSTON/NEW YORK: Retail US gasoline prices surged to two-year highs on Friday and global shipping routes were scrambled, even as some US oil refineries began restarting in the wake of Hurricane Harvey.
Major fuel pipelines feeding the US Northeast and Midwest were shut or severely curtailed, prompting shortages and dramatic spikes in wholesale cash prices that pushed the national retail average to $2.519 a gallon, the highest since August 2015.
Harvey raked across the Texas Gulf coast, roiling global fuel markets as it knocked out about 4.4 million barrels of daily refining capacity, slightly more than Japan uses.
Tankers carrying millions of barrels of fuel have been rerouted to the Americas to avert shortages.
European refining margins hit a two-year high amid the surge in exports, which included a rare cargo of jet fuel.
After record rains and flooding, the storm’s effects will be felt for weeks, possibly months.
Only some restarts have begun so far.
Governor Greg Abbott said on Friday Texas will not run out of gasoline despite refinery issues. “There’s plenty of gasoline in the state of Texas,” Abbott said at a news conference. “Don’t worry. We will not run out.”
The US Energy Secretary approved an additional release of crude oil from the Strategic Petroleum Reserve, adding 3.5 million barrels to the 1 million barrels approved as of Thursday.
The Explorer Pipeline, which hauls fuel from the US Gulf Coast to the Midwest, targeted a restart of its main lines on Sunday and Monday as refineries indicated they could resume supplies.
The Colonial Pipeline, the biggest US fuel system, remained partially closed but said it kept operating its system east of the flood-hit areas in Texas.
Marathon Petroleum Corp’s Galveston Bay Refinery in Texas City, Texas, had raised production to 45 per cent of its 459,000 bpd capacity, sources said.
In Corpus Christi, Citgo Petroleum Corp said it was beginning to restart its 157,500-barrel-per-day (bpd) refinery, while Flint Hills Resources and Valero Energy Corp were also moving to restart their plants, sources said.
Benchmark US gasoline futures surged more than 15 per cent after Harvey hit.
But on Friday, US gasoline margins tumbled more than 5 per cent and gasoline futures fell almost 2 per cent, their first daily loss since the storm.
“Yesterday, the anxiety over Harvey reached a crescendo,” said John Kilduff, partner at energy hedge fund Again Capital LLC. With the restarts, “you can see the light at the end of the tunnel.”
The biggest US refiner, Motiva’s Port Arthur facility which can handle 600,000 barrels of crude daily, will be shut for at least two weeks, according to sources familiar with plant operations.
Other plants in the Beaumont/Port Arthur area are expected to face similar challenges restarting as waters have kept rising even as flooding receded in Houston, some 85 miles (137 km) west.
The US average for a regular gallon of gasoline rose to $2.519 as of Friday morning, the highest since August 2015 and a 17.5 cent increase since August 23, before the storm began, according to motorists advocacy group AAA.
Stiffer increases were reported in the US Southeast. Pump prices in South Carolina have jumped nearly 30 cents a gallon. Prices were up nearly 20 cents in Texas, where fuel shortages were evident.
Suppliers in the Chicago area hoped to avoid shortages and taking steps to try to prevent them as wholesale prices kept rising. — Reuters
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