Gasoline future prices jump in Harvey’s wake due to refinery disruptions
Calgary – Canadian gasoline prices are expected to rise this week after widespread flooding from tropical storm Harvey forced many refineries on the Texas Gulf Coast to shut down.
Wholesale gasoline prices in the country will likely rise by an average of two to four cents per litre by Thursday, said GasBuddy senior petroleum analyst Dan McTeague, but consumers in certain markets could see much higher price increases.
McTeague explained that retail operators in markets like Calgary, Montreal and Ottawa are barely breaking even now and could use the wholesale price increase as an excuse to raise prices by as much as another 10 cents per litre to boost profit margins.
“Traders are taking a wait and see approach and I think that’s really why you’re going to see very little, for now at least, in the way of any major spikes until at least Thursday or Friday,” he said.
Canadian gasoline prices shown on the GasBuddy.com website were little changed on Monday.
U.S. prices are expected to spike over the next week or more as about 10 refineries representing more than 15 per cent of the nation’s refining capacity are closed, including ExxonMobil, Shell and Phillips 66 operations.
When water recedes, prices will fall more slowly than after other storms that hit the refinery-rich Gulf Coast, like Hurricane Ike in 2008, said Rick Joswick, an analyst with S&P Global Platts’ PIRA Energy.
Nearly three billion barrels of the 18 billion U.S. daily refining capacity had been knocked out. Most of the shut-downs have been precautionary, with only a few reports of minor flooding.
But the slow-moving nature of the storm means it could cause shutdowns to linger and leave more-lasting damage, said Goldman Sachs analyst Damien Courvalin.
“The damage could worsen if continued rains extend the flooding,” agreed BMO Capital Markets economist Sal Guatieri.
Meanwhile, Canadian companies with assets in the Gulf Coast area joined their American counterparts in closing offices and hunkering down to wait out the storm.
Precision Drilling CEO Kevin Neveu, who splits his time between Alberta and Texas, said his house in the Houston suburbs is dry so far but flooding has damaged the homes of at least five of his company’s 300 Houston-area employees.
“Our number one priority right now is make sure our employees are safe and sound and their houses aren’t damaged,” he said from Precision’s Calgary headquarters.
“Number two priority is to watch the civil infrastructure and see how that responds. When the streets are safe and the power is up and running and gasoline is available, that’s when we’ll expect people to start coming back to work.”
He said Precision’s main Houston offices and three field support operations are closed but 10 drilling rigs in the “rain zone” along the Gulf Coast are continuing to operate.
Calgary-based producer Baytex Energy announced it had suspended production (averaging about 37,000 barrels of oil equivalent per day) and exploration on its Texas Eagle Ford operations and closed its Houston office.
It said the moves were made to safeguard employees and because the markets it normally supplies with oil are closed or curtailed. It added it will restart operations gradually as market access improves.
Calgary-based pipeline company Enbridge, which bought Houston-headquartered Spectra Energy earlier this year, said Monday it had closed its Houston offices and has removed all but essential staff from its natural gas gathering and processing facilities in the Gulf of Mexico.