How the Galveston Bay oil spill affected gasoline prices

HOUSTON — Gasoline prices have been largely unchanged in the days since an oil spill temporarily closed the Houston Ship Channel and prompted worries that lower refinery output  might reduce fuel supplies and force up the price at the pump.

Nationally, unleaded gasoline sold for an average of just over $3.53 per gallon Tuesday, according to AAA, up less than a penny from the day before the spill. Houston-area gasoline sold for $3.38 per gallon, similarly unchanged despite the channel’s temporary closure.

Refiners haven’t said much about how their operations were affected by the waterway’s closure, which was lifted partly on Tuesday.  Officials with Shell Oil and Valero Energy declined to say whether the channel’s shutdown affected their production. A spokesman for Exxon Mobil Corp. said it had reduced production rates at its Baytown refining complex but declined to say by how much.

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In 2008, as Hurricane Ike barreled towards the Gulf Coast, refineries in the region closed operations. On the weekend the hurricane struck, the national average gasoline price spiked 12 cents–exceeding $5 per gallon in some parts of the country at a time when gasoline prices overall were higher than now.

The Texas Gulf Coast has refining capacity of nearly 4.5 million barrels per day, about 25 percent of the country’s refining capacity, according to 2013 figures from the U.S. Energy Information Administration, and the Houston Ship Channel serves a significant portion of those refineries.

So why didn’t market worries  about possible disruptions prompt higher prices at the pump?

Michael Green, a spokesman for AAA, said the impact was softened, in part, by the domestic energy production boom.  Refiners in the area are getting more crude from the Permian Basin and the Eagle Ford Shale in Texas and even the Bakken in North Dakota. In short, they don’t rely on ships for crude as much as they used to. If the spill had occurred a few years ago, the effect probably would have been more pronounced, he said.

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Green also said that the harsh 2014 winter weather kept motorists off the road in many  parts of the country, meaning gasoline supplies are available even if some refining is temporarily interrupted. “It’s just the simple fact that if you have a snow day, that’s thousands of people who aren’t driving,” he said.

Patrick DeHaan, senior petroleum analyst with GasBuddy.com, noted that the channel closure came at a time of year when many refiners reduce operations anyway to perform maintenance and prepare to make summer gasoline blends.  That would temporarily reduce their need for the channel to ship crude in and refined products out.

But a prolonged closure, or one later in the year, might well have caused a gasoline price spike, DeHaan said. “If this was the summer, and all these refineries were on full tilt, it probably would have been more noticeable,” he said.

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DeHaan compared the situation to low water levels on the Mississippi River last year, which resulted in the Army Corps of Engineers closing parts of the river and disrupting some barge traffic carrying refined products. That resulted in some localized gasoline price increases.

This week’s disruption in vessel traffic had no such effect.  “I would say that this was more significant on paper than it turned out to be for refineries,” DeHaan said.


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