Hurricane Harvey wreaked havoc in southeastern Texas and could be affecting all of us with increased prices at the pump. Much of our oil comes from the Gulf of Mexico and that production came to a halt as Harvey made its way to shore.
According to the Bureau of Safety and Environmental Enforcement, evacuations included 105 production platforms in the Gulf of Mexico. That’s roughly 14 percent of the 737 manned platforms in the area. Evacuations of personnel also included five drilling rigs, which is 50 percent of the rigs in the area.
This wasn’t a panicked exodus, but rather an organized evacuation process that includes careful shut-in procedures to ensure safety valves below the water are sealed to prevent oil or gas leakage. During past hurricanes, these valves functioned without problems 100 percent of the time, so there’s little worry of anything leaking from the evacuated rigs and platforms.
What is a worry is how much this will impact the price of gas. The temporary shut-downs are estimated to include approximately 22 percent of daily Gulf of Mexico oil production. That’s a loss of 378,633 barrels of oil every day until the storm passes. The closures also impact natural gas production, which was reduced by roughly 26 percent due to shut-downs.
Once Harvey’s danger is behind us, it’s not as simple as shuttling everyone back out to the sites and flipping a switch. Each site needs to be inspected for safety before it is brought back online. Any facility that checks out will be brought right back into operation, but damaged facilities will take longer, further hindering supply.
Harvey isn’t clear of the area, so there’s no knowing how quickly things will get back up to the usual capacity, but analysts expect an increase in gas prices. Depending on the severity of the situation, you could see as little as a 5 cent increase or as much as a 25 cent increase per gallon for gas.
The good news is this won’t be a long-term price increase. It all depends on how long production is slowed, but you can expect prices to temporarily go up before coming back down to the levels they’re at today.