Motorists in Calgary should expect to see significant price hikes at gas pumps this week, thanks to damage caused by wild weather in Texas.
While it won’t immediately be known how Hurricane Harvey will affect local gasoline prices, industry analyst Dan McTeague of Gasbuddy.com says Calgary should brace for increases similar to what the industry saw in 2008, when Hurricane Ike shuttered refineries along the Gulf Coast.
“It likely won’t become apparent until well into the afternoon on Monday how traders are going to look at this,” he said.
“But it’s a safe bet, if Ike was any indication, 12 cents per litre wouldn’t be out of the ballpark — perhaps higher.”
Harvey is the first hurricane to come ashore in Texas since Ike in 2008, and is the strongest storm to hit the state in nearly 60 years.
“This does brings back shades of nine years ago,” McTeague said.
“In 2008, they went up 12 cents per litre in one fell swoop. Not sure that’ll happen here, but we really need to see an estimate of the damage — particularly the flooding — how many refineries are down, and for how long.”
The refineries that line the coast from Corpus Christi, Texas, to the Louisiana state line represent roughly a third of the U.S.’s refining capacity.
McTeague said the storm stands to affect about 25 refineries, representing a daily production of a little under 4 million barrels — or 25 per cent of total U.S. daily production.
“Flooding is the biggest concern,” he said.
“(Given) protocols necessary to shut down a refinery and then turn it back on — you just can’t flip a switch.”
That process takes several days, he said — exacerbating supply shortfalls as facilities wait out the storm.
“We’re not talking about small refineries here,” he said, mentioning specifically the ExxonMobil Baytown complex just east of Houston — the largest petrochemical refinery in the United States.
“That’s 555,000 barrels per day, more than almost all we produce here in Alberta.”
While McTeague said Alberta doesn’t import gasoline from the United States, prices are based upon larger market conditions.
“A supply shortage continentally has an impact directly on price,” he said.
“People may not like the reality of it all, and I’d be the last one to defend the industry, the fact is a defensive position would have to be taken so you don’t wind up shorting supplies in Canada, so prices go up.”
“If I see NYMEX and Chicago spots (crude oil prices) popping Monday morning, then it’s a safe bet that within 24 hours we’ll start seeing prices rise in Calgary.”
As for how much of a ding the storm will have on wallets locally, McTeague said we’ll have to wait and see.
“Brace for a very costly week-and-a-half,” he said.