With Hurricane Barry on the horizon to hit the Eastern Coast of American in the coming days, gas prices are expected to take a severe hit. According to one energy and infrastructure portfolio manager, it wouldn’t be surprising to see widespread shutdowns of refineries all across the Gulf of Mexico, where the Hurricane is expected to hit.
Around half of America’s refining capacity situated near the Gulf, with approximately 18 percent of that in Louisiana alone, most of these refineries could either take a hit to their output or face outright shutdowns in the face of several inches of projected rain.
With Tropical Storm Barry projected at dropping over 10 inches of rain on New Orleans and the surrounding region, one portfolio manager is warning that the markets haven’t reacted as much as they should.
Jay Hatfield, who is the founder and portfolio manager of InfraCap, warns that he expects several refineries to be shut down for as long as a week in some cases. “When you shut down a refinery, it’s not like turning off the lights in your kitchen,” he said. “It takes about five days to get it back up and running.”
Already a number of refineries have been shutting down operations in advance to prepare for the storm. Phillips 66 shut down on such facility in Plaquemines Parish in Louisiana following a mandatory evacuation order. Other facilities owned by Exxon Mobil were reportedly making preparations to evacuate if necessary but are still up and running at the moment.
Those refineries that do get shut down will end up pushing up gas prices in the future. “It should be positive for refiners in general,” added Hatfield, adding that consumers would be hurt by the higher gasoline prices in the Gulf region for the weeks to come following the storm. While hurricanes are a frequent occurrence in the U.S., it’s uncommonly rare for a big storm to arrive so early in July.
According to Reuters, hurricane Barry has led to the shut down 1.11 million barrels per day of U.S. oil production in the Gulf of Mexico, around 59 percent of the region’s daily crude output as well as 49 percent of its natural gas production. Over 267 facilities in the Gulf have been evacuated, and 11 drillships have been moved out of the path o the storm.
While offshore drillers have already been impacted greatly ahead of the storm, analysts expect drillers will be able to return to normal production faster than the land-based refiners, as the expected 10-plus inches of rainwater will take a while to subside in many of the southern states.
Retail gas prices have been rising over the past few weeks, reaching a national average of around $2.78 for regular gas. However, Friday saw gas futures fall on Friday, a reaction which puzzled many experts that figured prices would rise on the anticipation of shutdowns coming from the store. Regardless, the next week is almost certain to see price spikes as Barry proceeds to wreak havoc on the country’s gas production output.
