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Texas Oil Sector Bounces Back from Harvey

The Law Office of C. William Smalling, P.C. Sept. 15, 2017

The Texas oil industry is rapidly recovering from the ravages of Hurricane Harvey, with most of the refineries up and running again and the major ports in the state returning to normal operations. As has widely been reported, after Harvey made landfall, up to one-third of the nation’s refinery capacity was offline, halting delivery of Texas petro-products to the Northeast through the Colonial Pipeline.

Now, the recovery in oil production has been quicker than many analysts predicted. Moreover, as operations ramped up, prices for gasoline eased up a bit. As of September 9, the national average price for a gallon of regular gasoline was $2.67, according to the AAA motor club. Though prices had risen by about 20 cents after the storm, analysts now believe the spike in prices is past peak. The higher prices and profit margins for gasoline should also encourage other refiners to return.

How the Texas Oil Sector Bounced Back

Some energy sector experts expressed surprise that oil refinery operations did not experience longer storm damage-related delays. However, the rapid recovery could be due in part to the fact that Harvey inflicted more damage from flooding as the storm stalled over the Houston area, bringing 50 inches of rain. In previous tropical storms that have hit the Gulf region, most of the damage to the energy infrastructure was caused by heavy winds.

Harvey’s impact on the energy sector has also been smaller than in previous storms because refineries have built stronger protections against flooding in recent years. Additionally, offshore production platforms have also been fortified. Finally, the growth of shale drilling inland has eased the production demands in the gulf region.

In any event, Corpus Christi soon began receiving fuel tankers to supply regional refineries, and crude exports were also back in flow. Additionally, the main arteries for petroleum loading and uploading in Texas City and Houston were quickly back on line. The only caveat is that detecting damage to underwater pipelines could take weeks to detect.

The Bottom Line

In sum, the oil industry along the Texas coast is back on its feet and gas prices should continue to fall. That’s the good news. The bad news is that  thousands of Texans are still trying to pull their lives back together in the wake of the flood. It is also unclear whether there have been environmental impacts from damage to the energy infrastructure. Ultimately, such assessments  will require the advice and counsel of an experienced energy and environmental attorney.