Harvey is packing a punch in more ways than one.

The hurricane, which is devastating the Texas gulf coast, is hurting gas prices throughout the United States.

According to AAA Kansas, as Hurricane Harvey blasted Texas, gas prices shot up across the country. At $2.37, today’s national gas price average is 4 cents more expensive on the week and one of the largest one-week national gas price surges seen this summer.

About one quarter of oil refining capacity in the Gulf Coast had been taken offline, according to Oil Price Information Service (OPIS). That equates to about 2.5 million barrels/day. Harvey also caused eight refineries in Texas to shut down, while several others are operating at reduced rates.

"No doubt, Harvey has impacted operations and access to refineries in the Gulf Coast. However, a clear understanding of overall damage at the refineries is unknown," said Shawn Steward, AAA Kansas spokesperson. "Despite the country’s overall oil and gasoline inventories being at or above 5-year highs, until there is clear picture of damage and an idea when refineries can return to full operational status, gas prices will continue to increase."

On Sunday, Magellan Midstream Partners suspended all inbound and outbound refined products and crude oil transportation services on its pipeline systems in the Houston area. Conversely, the Colonial Pipeline said its Gulf Coast pipeline and terminals are continuing to operate normally.

Harvey is expected to continue to impact the region through the middle of the week with an additional 15 to 25 inches of rain expected over the middle and upper Texas coast through Friday.

To help alleviate the tight and potential shortage of supply, the Environmental Protection Agency (EPA) announced over the weekend that it will waive environmental standards on gasoline for select counties in Texas.

"As in any national or local state of emergency, AAA expects gas prices to be held in check up and down the gasoline supply chain, including prices set by refiners, distributors and dealers unless there is a clearly justifiable reason for an increase," added Steward.

The average price of gas in Kansas today is $2.21 per gallon, up 3 cents from a week ago. At 16 cents less than the national average, Kansas gas prices are 12th lowest in the country, said Steward.

"Gas prices are up in many places and motorists should be gearing up for more in the coming weeks, thanks to Hurricane Harvey inundating significant refineries along the Texas coastline, leading to closures and tilting the delicate balance of supply and demand," said Patrick DeHaan, senior petroleum analyst for GasBuddy.com. "Prices will likely rise nearly country wide heading into Labor Day, from rural towns in the Rockies to major cities in the Midwest and West Coast — nearly everyone will feel a bit of a pinch at the pump from Harvey. The impact could linger for several weeks or longer, depending on how long it takes Texas refiners to return to normal operations.

"In addition, the situation could worsen should more shutdowns or outages happen in the coming week as Harvey continues to drop feet of rain on already flooded Texas."

Local gas prices have stayed the same, as Conoco at the corner of 2nd and Market streets is at $2.12 a gallon and Love’s, Flying J, Murphy USA, Dillons and Kwik Shops are all listing at $2.13 as of Tuesday morning.

It can take about a week for big changes in futures prices to hit drivers at the pump. Tom Kloza, head of global of energy analysis at the Oil Price Information Service, said he expected retail gas prices to go up about 15 cents a gallon, perhaps more along the Gulf Coast.

"This is not going to have an apocalyptic impact on what we pay at the pump," he said.

Kloza said retail prices haven’t gone up more significantly because gas stations "don’t want to be the evil guy who raises prices during the storm."

Thankfully, gas price spikes after hurricanes tend to be fleeting.

After hurricanes such as Katrina, Rita, Ike and Isaac, gasoline prices peaked within 2 weeks of landfall, at 20 to 80 cents per gallon higher, according to PIRA Energy.

More good news: Gasoline markets aren’t freaking out. One reason is that there are ample stockpiles of gas, which helps compensate for the loss of Gulf Coast refineries. Other major storms took place before the U.S. oil boom, when inventory was much lower.

It also helps that few major U.S. refiners have reported extensive damage from Harvey so far.

According to CNN, crude oil prices are tumbling, which is also strange during a hurricane which is disrupting production.

Crude prices tumbled by nearly 3 percent on Monday, the biggest drop in nearly two months, and dipped again on Tuesday.

So why hasn’t Harvey led to higher oil prices like it has with gasoline prices?

The key is that the historic storm has hammered demand by crude oil’s biggest customers: refineries and American drivers.

Harvey forced the shutdown of 10 oil refineries along the Gulf Coast, a U.S. energy hub. At least one, ExxonMobil's huge Baytown facility, has suffered damage. And the refineries that remained open aren’t operating at full speed. Ports in Houston and Corpus Christi are closed, so there’s less oil to refine.

Almost 3 million barrels of oil a day can’t be refined into gasoline and other products — about 16 percent of U.S. refining capacity, according to Goldman Sachs.

That’s far more than the amount of oil production that has been interrupted. FGE Energy estimates that Harvey interrupted the production of about 380,000 barrels per day in the Gulf and 400,000 barrels inland. No major damage has been reported to oil rigs, and production is beginning to come back.

And the U.S. shale oil boom has lifted production so high that the country is brimming with enough crude to soften the blow from Harvey.

Meanwhile, the storm has hurt demand for oil products. The storm has crippled Houston, America’s fourth-largest city. That means less appetite for gasoline for cars, diesel for trucks and jet fuel at airports. FGE estimates that flooding may slash gasoline demand by about 150,000 barrels per day.

The eventual hit to U.S. oil demand will ultimately be larger than the impact on supply, Goldman Sachs predicted. That forces the price of crude down, not up. Which means any higher gasoline prices now should be lower in the future.


To contact this writer email rbluhm@dodgeglobe.com.