Disaster Impact Report part 1 of 3 - Oil & Gas
This year’s widespread natural disaster related destruction from Hurricanes Harvey, Irma and Maria, followed by Mexican earthquakes and Californian fires, has created ripple effects across all industries. Industries that experienced great shocks have been oil and gas, utilities, Florida’s crops, and manufacturing. The ProcureAbility Intelligence team has developed a three-part blog series to highlight these impacts.
Part 1 = Oil and Gas
Part 2 = Utilities and Agriculture
Part 3 = Manufacturing
The impacts of the 2017 hurricane season on oil and gas prices
When Hurricane Harvey hit Houston and surrounding areas in Texas, it caused massive disruption to the oil and gas industry. Estimates place storm related outages at 3.04 million barrels per day, or 16% of total U.S. capacity. Weeks after the storm, refining capacity was still only working at 50% making the total downed capacity 4 million barrels per day or 22% of the U.S. total. Houston, the 4th largest U.S. Port, and others along the Texas coast were closed for days, restricting oil and refined products as well as imports and exports. As a result, prices rose sharply due to the decreased supply and logistical constraint. A few days later prices spiked again when Hurricane Irma made landfall in Florida.
Increased demand and falling inventories caused Florida and Miami gasoline prices to significantly rise between August 28 and September 4, 2017. Markets appeared to be anticipating a return to more normal conditions, and by September 11 state-wide average retail gasoline prices in Florida decreased one cent per gallon from the prior week.
Today, gasoline prices are falling back in line as refineries level out and supply and demand sync back up. According to the Energy Information Administration’s (EIA) latest Short-Term Energy Outlook, after reaching a two-year high, regular gasoline retail prices began to ease as U.S. refinery capacity and gasoline production gradually came back online following Hurricane Harvey. Looking forward, the EIA forecasts the U.S. regular gasoline retail price will continue to fall to an average in December, much closer to predictions prior to the disasters
Price per barrel timeline August – December 2017
– Hurricane Harvey hit Texas
August 28 through September 4
– USD 2.30 per gallon –> USD 2.70 per gallon
– USD 2.48 per gallon –> USD 2.87 per gallon
– Hurricane Irma hit Florida
– USD 2.70 per gallon –> USD 2.69 per gallon (two year high)
– USD 2.69 per gallon –> USD 2.57 per gallon
Estimated Average for October
– USD 2.49 per gallon
Estimated Average in December
– USD 2.33 per gallon