Gasoline prices hit five-month highs as Hurricane Harvey made its way towards Texas. The storm is expected to hit the Texas Gulf Coast today as strong as a Category 3 storm, the strongest hurricane to hit the United States in over a decade. Once the storm hits Texas it is expected to stall over land, potentially dropping up to three feet of rain and leading to catastrophic flooding.
More than 45% of the United States’ refinery capacity is located along the Gulf Coast, as well as 51% of the country’s natural gas processing capacity. At least five refineries have already shut down operations in preparation for the storm, and oil rigs and production platforms in the Gulf of Mexico have been evacuated.
Depending on how bad the flooding is and how long the rains last, Harvey could have significant impacts on oil production, oil refining, and shipments of oil and petroleum products to and from the ports along the Texas Gulf Coast. Large amounts of rain could also affect oil production in the Southern Texas oil fields.
The longer production and refining remain offline, the higher oil and gasoline prices will rise. While many analysts expect prices to come back to normal by late next week, if the storm ends up being stronger than predicted then oil and gas prices may see higher prices for a prolonged period of time.