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Here’s What Hurricane Harvey Has to Do With That Surge at the Gas Pump
Gas prices are set to rise by as much as 25 cents per gallon across the nation as Hurricane Harvey continues to cause lasting damage to Texas.
Gasoline futures, an indicator of where prices are headed at the pump, were up 5% on Monday after before spiking by as much as 7% over the past few days. Drivers will start to see these price surges later this week, because it usually takes several days for the effect to trickle down to consumers.
How Hurricane Harvey Is Affecting Gas Prices
Several factors will influence the severity and longevity of the imminent gas price spikes.
After slamming into the Gulf Coast as a powerful Category 4 hurricane on Friday night, Harvey was downgraded to a tropical storm before stalling over land. As of Tuesday morning, it had dumped more than 40 inches of rain on Houston and surrounding areas.
The area is now facing one of the worst flood disasters in U.S. history.
The Gulf Coast of Texas is home to oil refinery plants that account for nearly one-third of the nation’s oil refining (and therefore gasoline producing) abilities. As flood waters continue to rise, these plants are being shut down as working conditions are deemed unsafe and workers are evacuated.
So far, 10 oil refinery plants in the Houston and Corpus Christi areas have been forced to shut down because of the flooding. These plants, including the second largest oil refinery in the U.S., Exxon Mobil’s Baytown refinery, account for as much as 15% of the nation’s oil refining capacity.
Matt Smith, director of commodity research at ClipperData, told CNN, “The pop in gasoline prices is an immediate response to the closure of refineries on the U.S. Gulf Coast.”
He also noted that “fears of a supply crunch are sending prices charging higher.”
While we almost always see a jump in gas prices immediately following large storms, it’s usually short-lived. According to PIRA Energy, an analytics unit of S&P Global Platts, gasoline prices “peaked within two weeks after landfall at a level of 20 cents to 80 cents per gallon higher” after hurricanes Ike, Rita, Katrina and Isaac. About two to four weeks after each storm, gas prices returned to prestorm levels.
Tom Kloza, chief oil analyst at the Oil Price Information Service, predicted Thursday that Harvey was likely to cause only a short-term spike in gas prices and only by about 5 to 10 cents per gallon. He went on to say that a 25 cent spike would be a worst-case scenario — but that it’s possible given Harvey’s magnitude and the widespread flooding and prolonged recovery predicted for the Houston area.
Additionally, while prices would naturally rise — and then quickly fall — over the Labor Day holiday weekend, we can expect prices to stay high through most of September as these refineries work to get back into production and bring the gasoline market back to equilibrium.
How to Save on Gas this Month
As you gear up for Labor Day, here are some tips and tricks to make your gas budget stretch as far as possible as we ride out the surge over the next several weeks.
- Implement these tips from AAA for conserving fuel, including keeping your tires filled and accelerating gradually.
- Use your fuel rewards. If you’ve been collecting gas perks from any of these programs, now might be the perfect time to use them.
- Try biking or carpooling to work. Not only will you save money on gas, but you’ll either get some exercise or maybe even make a little extra money this month.
- Labor Day is a big weekend for travel, but if you don’t have any concrete plans, consider taking a staycation instead of hitting the road. Pick a few fun things to do around your town. And don’t worry — fun date ideas = fun staycation ideas, too.
- Finally, check out this list of 23 expert ways to save on gas, and make sure you’re using these tips all month long.
Grace Schweizer is a junior writer at The Penny Hoarder.