Most Texan oil refineries are offline—underwater, flood damaged, and in the short term, closed for business. Close to 2.2 million barrels of capacity sit idle each day. Today (Aug. 30), the largest refinery in the country, owned by the privately held company Motiva, shut down, marking an additional 603,000 barrels-per-day of lost productivity.
And share prices for petroleum refining companies are up since the forecasts for Harvey started to worsen on Aug. 22. Gasoline futures also started to rise in anticipation of the storm, which hit on Aug. 25.
Texas is central to every step of the US gasoline supply chain. Its gulf coast houses nearly a third of US refining capacity, with 30 operable refineries. The broader Gulf of Mexico region is responsible for close to 20% of all US crude production, and Texas, specifically, is home to 19 of the largest oil fields in the US.
In response to Hurricane Harvey, Valero, the largest petroleum refinery company in the US, shut down its facilities in Texas. Three days into the storm, its share price was more than 4% up. Other major refiners, all with locations in Texas, have seen similar stock performances. Three major players in Texas—Valero, Phillips 66, and Marathon Petroleum—gained more than $850 million in value while their refineries were inundated by as much as 40 inches of rain. Their facilities elsewhere are operating, however.
Harvey created ideal conditions for a knee-jerk share price jump. The storm strangled supply chains, pushing crude to a one-month low, and shut down refineries, ratcheting up the price of gas. Companies that primarily convert crude into gasoline are temporarily in luck—their input is now extremely cheap and their output could cost up to 25 cents more. The cost of damages will roll over to insurance companies. The cost of days to weeks of productivity losses will hit consumers nationally, at the gas pump.
This is in part why ExxonMobil and Royal Dutch Shell’s stocks have not faired as well as other refining companies—they have massive investments in crude oil. The price of West Texas Intermediate, “Texas light sweet” crude, has been down by almost 1% since the state’s refineries went offline.
Still, everything is not quite so rosy for refineries. The shutdowns are forcing international buyers, of both crude and gasoline, to take their business elsewhere, raising demand for foreign raw and refined products.
Correction: An earlier version of this article misstated the gain in market value for four major refiners. It was more than $850 million, not more than $14 million.
This story was updated with details of Motiva’s refinery closing due to flooding and to clarify when refinery-company share prices started to rise.