Big Red Car here (with a full tank of regular, y’all) telling you what’s going to happen with the price of gasoline in Texas and the rest of the country.
[Note: The country is actually divided between Texas and the “rest of the country.” Sorry. Deal with it. If y’all had better barbecue and wider acceptance of breakfast tacos, this wouldn’t be happening, but, no, you don’t. Do you? Whose fault is that?]
Hurricane H [we are not longer saying THAT name, son-of-a-bitch] has knocked out all of the Gulf Coast refineries. This has dampened supplies of gasoline and other products.
Talk to me, Big Red Car, gasoline, talk gasoline
Let’s catalog the issues:
1. Local delivery out of commission.
2. Gas stations going dry, long lines reminiscent of Katrina (2005) and the 1970s OPEC induced shortages, and higher prices. Gas jumped in Texas $0.10 in a single day. Every $0.01 is $4MM more cost to consumers a day.
3. Refinery production out of commission. One third of the Nation’s gas supply comes out of Houston, Beaumont, Corpus Christi, and Port Arthur. All in the dead zone and flooded.
4. Distribution pipelines unable to access supply. See #3 above. All of y’all in NYC, you smugnesses, your Texas to NYC pipeline is also down for the same reason — no supply.
The NY pipeline pushes 100,000,000 gallons of product a year. More than half of its connected refineries are down.
Point of order — this pipeline business is very complicated. Companies like Williams Company are sending natural gas directly from the Gulf Coast to NYC as well as fueling the big new LNG plant in Sabine Pass (first huge LNG plant for export of LNG to Eastern Europe, cutting off Putin’s stranglehold on Europe via natural gas).
5. Texas ports are closed to fuel barges. This would, normally, be a huge shock absorber, but it is not going to happen for a while.
6. Offshore rigs in the Gulf are down by 20%. They are connected to pipelines which bring the crude oil ashore, so they were not impacted as much.
7. Shale oil production (3% of all oil production) is under attack as they cannot get diesel to run their operations. This is a short term problem, but the extraction of shale oil is dependent upon pumps and pumps live on diesel.
Solutions, Big Red Car?
There are solutions and the Trump admin has been quick to initiate them:
1. The Trump admin’s Energy Department authorized an immediate release of 500,000 barrels (55 gallons per barrel) from the nation’s Strategic Petroleum Reserve to the Phillips 66 refinery in Lake Charles, Louisiana.
First such action taken since 2012. [The 2012 release was in support of the Iranian oil export sanctions which was designed to draw the Iranians to the bargaining table. All this stuff is connected.]\
Short term problem: the SPR is located … wait for it … along the Gulf Coast, but enough of it is safe in Louisiana to be effective.
The SPR has a total of 727,000,000 barrels and is the largest such emergency supply in the world. That is a very deep pocket.
Good news — lots of capacity. Bad news — takes about two weeks for the impact to be felt at the pump, but it can be transferred at the rate of 4,400,000 barrels per day.
2. Northeastern consumers are already benefiting from stealing supply from Florida.
3. More refined product (gasoline, diesel, jet fuel) supply will be moved from the Midwest via rail tanker (more dangerous conveyance than pipelines), supply from other American refineries, and imports from the Middle East and Europe into the Port of NY.
[This is why projects like the Keystone XL Pipeline and the Dakota Pipeline are so important. They were focused on supplying Gulf Coast refineries, but since they are connected to multiple pipelines, they could divert supply to refineries which are not located on the Gulf Coast.]
Bottom line it, Big Red Car — gasoline prices
Dear reader, gasoline prices are going UP. You knew that, right? Supply down, demand constant = prices up. You knew that.
Already up $0.10/gallon in sweet little old ATX. Up $0.05/gallon in the rest of the country.
South Carolina prices are up $0.20/gallon.
The K Bitch Hurricane drove prices up $0.40/gallon and sustained that rise for forty days.
Bottom line? It’s going to be fine, but it’s going to cost more to drive your car and there will be gas lines for a few weeks, maybe.
Pray for Houston. Pray for Texas. But, don’t worry. Hell, it’s Texas. Hold our beer while we clean this mess up. God bless Texas!