Harvey’s Financial Impact on Oil Companies

Hurricane Harvey certainly caused unprecedented damages to the infrastructure, people’s lives, the surrounding land, and local businesses, but the storm also had a profound impact on the oil and natural gas industry as well.

The highest recorded Harvey rainfall came in at almost 52 inches at Cedar Bayou, which is not far from “Refinery Row,” which is between Houston and Baytown.

Texas Gov. Greg Abbott estimates that the total cost of repairing the storm’s damage will amount to more money than either Hurricane Katrina in 2005 or Hurricane Sandy in 2012.

The day after Harvey first hit was Saturday, Aug. 26, the peak of the storm, where almost one-third of the offshore oil and gas production in the Gulf of Mexico had to be shut down. However, the storm’s more significant impact on the petroleum industry seems to have taken place on the mainland. To make matters worse, southern Texas was hit hard and contains the largest amount of pipelines, refineries, and terminals in the United States are located, which transports and processes the fuel for, not just the US, but also for the world market.

Some of the biggest oil and gas companies, like ExxonMobil, Valero Energy, Motiva, and Royal Dutch Shell, among others, temporarily halted production in southern Texas for the time being.  Nearly one-third of all oil refineries have been affected by the storm, while these companies, both big and small, continue to provide updates on their companies’ websites, especially BP, Exxon, and Valero.

In order to keep the industry up-to-date with the latest information, the Energy Information Administration, during Harvey, published a real-time map on its website that tracked the storm’s path, as well as other noteworthy weather patterns, in relation to all refineries and pipelines in the area.  Simultaneously, the Department of Energy published frequent updates on the region’s electrical, oil, and gas industries.

The concentration of the oil and gas industry and Texas has increased because of the shale boom in the United States. With the recent fears of an oil and gas shortage in mind, according to Antoine Halff, a representative from Columbia University’s Center for Global Energy Policy, “No country, no matter how might an oil and gas producer it might be, is beyond the threat of catastrophic damage.”

Halff may have initially meant for his statement to refer to the resilience of the US energy supplies, especially in the age of shale, but his points are just as applicable to the effects of Harvey on the industry. When rumors of a possible oil shortage emerged, people bought oil and gas in a fit of panicked hysteria, which actually caused an actual oil and gas shortage, especially in Dallas, Texas. However, there was never any real danger of oil shortage, because an armada of tankers was supplied to the US markets from Europe.  The US wholesale gas price did rise by nearly a third but soon returned to its normal, stable price again.

While the American Automobile Administration (AAA) initially predicted that the average price of gasoline would balloon to $2.50 per gallon, which would have been the highest mark up since 2015, they then predicted that the price of gasoline would return to normal after a month’s time, which it did.

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