Harvey’s impact will be felt all over the globe

From the field to the refinery to the tanker, from the U.S. Gulf Coast to New York to South America and Asia, Hurricane Harvey may disrupt the entire energy supply chain for months. As ports from Corpus Christi, Texas to Lake Charles, La. begin to reopen, although with restrictions, and some U.S. refineries in Texas begin to resume operations, oil markets calmed a bit Friday.

However, the impacts of Harvey have yet to be fully realized.

S&P Global Platts continues to track roughly 3-4 million barrels a day (b/d) of offline refining capacity in Texas, accounting for up to 22 percent of total U.S. refining capacity and nearly half of the refining capacity along the U.S. Gulf Coast. 

The most immediate and obvious impact has been gasoline prices, which increased 14 percent day-over-day on Thursday as the Colonial Pipeline, which supplies the Atlantic Coast with 60 percent of its gasoline supply, ran an intermittent service due to pipeline issues in Texas. Colonial has cited a lack of supply because of the Texas-area refinery outages. 

As U.S. drivers head out for the long Labor Day weekend, the U.S. Atlantic Coast will have to rely heavily on European gasoline imports, but so, too, will countries in Latin and South America, which had been importing 1.6 million b/d of refined products from the U.S. Gulf Coast before Harvey.

Without the 600,000 b/d of gasoline exports from the U.S. Gulf Coast, the entire Atlantic basin will be competing for a smaller pool of supply, increasing prices at the pump from New York to Buenos Aires. 

Crude tankers from as far away as China and Korea continue to queue in the Gulf, waiting to fill with U.S. crude. With the alleviation of the export ban on crude oil, the U.S. has been exporting over 1 million b/d in 2017, 75 percent of which was exported from the U.S. Gulf Coast.

In 2016, when U.S. crude exports averaged just 600,000 b/d, only half of those barrels were exported from the Gulf. The hurricane has left hydrocarbon-hungry consumers like China, India and Southeast Asia short 450,000 b/d, or more than 3 million barrels from one week of port closures. 

Flooding and tanker traffic will continue to delay cargoes and limit the amount of crude the U.S. can supply to the world. 

The impact will be felt even further downstream in the global industrial and manufacturing sectors as over half of the United States’ petrochemical infrastructure, the basis for chemicals and plastic products, remains offline.

The U.S. Gulf Coast, as one of the world’s largest petrochemical markets, is a primary supplier of petrochemical feedstocks and products to countries like China, Korea, Taiwan and many other developing countries.

A disruption in supply in U.S. exports has the potential to affect nearly every industry in the world’s fastest-growing demand centers, from the auto industry to textiles to food transportation to medical devices.

In the wake of the Shale Revolution in the U.S., the ports of Texas and Louisiana have become some of the most vital in the world for global energy security. The entire globe will depend more on crude oil, natural gas, gasoline, diesel and a slew of other refined products and petrochemical derivatives from the U.S. Gulf Coast.

The days, weeks and months to come will only serve to reinforce the region’s growing importance in the global energy market as Gulf Coast operations struggle to return to normal.

Nicole Leonard is a senior project consultant for S&P Global Platts Analytics Oil & Gas Consulting.

The views expressed by contributors are their own and not the views of The Hill.