Hurricane Harvey-related tie-ups could thwart Labor Day plans, pump prices rising

Hurricane Harvey’s rampage through the nation’s critical Gulf Coast refining infrastructure could cause snafus for the final leg of the nation’s vacation travel season, driving up pump prices across the U.S. and forcing some coastal destinations now covered by water to remain boarded up through the Labor Day weekend.

Already, gas prices in some areas of Arkansas are ratcheting up above the national average and some travel industry experts were busy revising the pre-holiday travel weekend, which traditionally lasts from Thursday (Aug. 31) to the first Monday of September.

Just two weeks after the industry trade group for the nation’s top airlines had projected that 16.1 million passengers were planning to fly scheduled service on U.S. airlines over the six-day travel period, Airlines for America (A4A) was muting earlier rosy predictions as remnants of Hurricane Harvey still pound parts of Louisiana and Texas. A4A spokeswoman Kathy Allen told Talk Business & Politics that although the trade group will not update or change its earlier forecast, there was “no question that the devastation affecting one of the largest metropolitan centers in the U.S. and a major air travel hub, as well as outlying areas and other cities in the region, will curtail the passenger volumes previously projected for this period.”

“However, it is premature to speculate on the quantitative impact,” Allen said. “Airlines are focused now on the operational recovery, the safety and well-being of their workforce and rebooking customers whose travel, including connections, involved the hurricane-affected locations.”

A4A’s original estimates on Aug. 16 were up 5% from the 15.4 million airline passengers that flew to Labor Day destinations last year, which would have pushed top carriers like American, Delta, United and Southwest to add 133,000 extra seats during the holiday. Over the seven-day air travel period, beginning Wednesday, Aug. 30, and ending Tuesday, Sept. 5, A4a said Atlanta’s Hartsfield-Jackson, Los Angeles International Airport and Chicago O’Hare, respectively, are expected to be the three busiest U.S. airports based on departing seats in scheduled service. Friday, Sept. 1, is expected to be the busiest day, followed by Thursday and Monday, Sept. 4.

Similarly, millions of travelers are also expected to hit the nation’s highway during the long Labor Day weekend, although AAA has halted its annual holiday forecast due to more interest in Memorial Day and the Fourth of July travel periods.

ARKANSAS PUMP PRICES RISING
Yet, AAA’s daily fuel gauge shows pump prices are rising rapidly across the U.S. and most of Arkansas, with prices in some areas spiking above $2.50 for a gallon of regular unleaded. Statewide, fuel prices in Arkansas have jumped six cents over the past 7 days to an average of $2.17 for a gallon of regular unleaded, the highest weekly increase this summer.

Fort Smith and Central Arkansas have the lowest prices at $2.08 and $2.14 per gallon, respectively, while costs to fill up a tank in Texarkana have jumped five cents to $2.20 per gallon over the last week, according to AAA. Pump prices in Northwest Arkansas and Pine Bluff are averaging about $2.16 and $2.18, respectively, for a gallon of regular unleaded.

Still, motorists looking for a bargain can find pump prices in several locations in Arkansas well below $2 a gallon, GasBuddy.com’s real-time gas map shows. For example, a Citgo gas station in Jacksonville has the lowest reported price in Arkansas at $1.93 per gallon. At least a dozen locations in Fort Smith are selling regular unleaded at $1.99 per gallon.

Nationally, gasoline prices are averaging about $2.40 per gallon, up six cents from a week ago. In Texas, prices are up four cents to an average of $2.17 per gallon as widespread retail gas station outages have been reported. Statewide, prices vary among cities hit hard by the hurricane and tropical storm.

8 U.S. REFINERIES CLOSED
According to recent forecasts by Oil Price Information Service (OPIS), about one quarter of the nation’s oil refining capacity in the Gulf Coast has been taken offline as of late Wednesday evening, equating to about 2.5 million barrels of gasoline per day.

Data from the U.S. Energy Information Administration (EIA) and IHSMarkit, a global data analytics and research firm, said Harvey also caused eight refineries in Texas to shutdown, including four each in the Houston and Corpus Christi areas. The mammoth 584,000 barrel per day ExxonMobil in Baytown, Texas, one of the largest refinery complexes in the world with a labor pool of 7,000 workers, was taken offline ahead of the historic flooding that hit the region.

Valero Corp., the nation’s largest refiner, also shut down its 300,000 per day Port Arthur and smaller Three Rivers refineries in the Corpus Christi area over the weekend. On Wednesday, startup on the Three Rivers facility was underway, but the Port Arthur refinery is still idle due to flooding and potential power supply interruption. Key refineries in the Houston area owned by U.K.-based oil giant Shell Oil, Phillip 66 and Pasadena Refining, representing more than 800,000 barrels per day of refining capacity, are still being assessed for damage before coming back online. In Corpus Christi, Citgo’s 163,500 barrel per day refinery and the 300,000 barrel per day Flint Hill chemical complex owned by Koch Industries have not resumed work.

“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 AAA spokeswoman Jeanette Casselano. “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.”

Tulsa-based Magellan Midstream Partners suspended all inbound and outbound refined products and crude oil transportation services on its pipeline systems in the Houston area. A year ago, Magellan completed a $200 million, Fort Smith-to-Little Rock pipeline project that brings refined gasoline products into state’s largest transportation hub from the Gulf Coast.

In response to a Talk Business & Politics query, Magellan spokesman Bruce Henne said as of late Wednesday evening the company’s 18-inch refined products pipeline from Texas City, Texas into the Houston area had been reactivated.

“The remainder of Magellan’s refined products pipeline systems in Texas and throughout the Midwest are operating normally,” Henne responded. “Operations on our crude oil pipeline systems in the Houston area remain suspended although we are continuing to receive west Texas crude oil into our storage facility at the origin of the Longhorn Pipeline system in Crane Texas.”

Despite no major damage to any Houston refineries, Tropical Storm Harvey is now headed to the sizeable Port Arthur/Lake Charles refining hub along the Texas-Louisiana border, home to seven refineries and 12.3% of U.S. refining capacity, according to IHS-Markit. This region has already received significant rainfall and it is expected to receive another 5-15 inches through Friday.

“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,” Casselano said.