Hurricane Harvey Taught Us Much About Our Industry

bigstock Gas pump nozzle 10726661
bigstock Gas pump nozzle 10726661

Hurricane Harvey blew into Texas as a Category 4 storm in late August, and then lingered like no previous storm had ever done before. By the time the beast finally moved on up the coast into Louisiana, it had dumped more than 50 inches of rain on parts of Houston, decimated Rockport (as Kelly Warren Moore eloquently details elsewhere in this issue) and many other parts of southeast Texas, put a million people out of their homes, knocked 22 percent of the nation’s refining capacity offline and shut in much of the Eagle Ford Shale region’s oil wells for a week or more.

It was a record-setting storm, the likes of which Texas had never seen before — and that all Texans hope to never see again. But during the course of the storm, and the recovery from it, we all learned much about the oil and gas industry and its infrastructure, most of it positive. These are lessons we should hope to retain.

The first and perhaps most important lesson we all learned — or maybe it’s more accurate to say “relearned” — is how important the oil and gas industry is to our daily lives. The shutting-in of 25 percent of the nation’s refining capacity due to Harvey resulted in gasoline shortages not just for those in southeast Texas who suffered through the lingering and ultimate passage of the storm, but also for the rest of Texas as well. In fact, gasoline shortages extended all the way up the east coast of the United States, as the refinery outages caused the temporary closing of the Colonial Pipeline, which carries gasoline all the way up into the New England region.

I personally had a hard time finding gasoline in and around my hometown of Mansfield, near Fort Worth, for more than a week after the storm, and some stations in North Texas were still selling only regular gas for weeks after that. Life is not much fun when you can’t find gasoline. We’ve learned this lesson time after time over the decades but always tend to forget since years go by in between the natural disasters or embargoes that cause fuel shortages.

The second lesson we were reminded of is that gasoline prices have been comparatively low for several years, since the price of crude oil became depressed in 2014. The refinery closures caused by Harvey led to about a 20 percent increase in the price of regular gas in the weeks after the storm, but peaked at about a statewide average of $2.79. As expensive as that is, it is a far cry from the $4 Texans were paying for gasoline a few years ago, when oil prices peaked, and it’s far cheaper than the $1 per gallon we paid in the late 1970s (adjusted for inflation, that’s $3.75 in September 2017).

Patrick DeHaan, a Senior Petroleum Analyst for GasBuddy, predicted that gas prices would continue to decline throughout the fall in an Oct. 9 interview with the Houston Chronicle. “The gasoline supply has continued to improve and, as temperatures begin to feel more fall-like, demand for fuel will continue to decline,” DeHaan said. “Nationally, prices still stand about 15 cents per gallon higher than their pre-Harvey level, but the gap will continue to slow as prices slowly trickle down.”

Gasoline is one of the greatest bargains in American life, especially when considering the key role it plays in strengthening our economy and making all of our daily lives more convenient. We tend to complain about gasoline because it is a product most of us have to purchase — it is a necessity in our life, not a convenience. It’s only during times when we lose access to it that we realize how important it truly is.

Hurricane Harvey also dumped prodigious amounts of rain in the heart of the Eagle Ford Shale region, causing flooding and other disruptions that resulted in the shutting-in of thousands of the area’s oil and natural gas wells. The energy-related news media made a very big deal out of this, publishing all sorts of speculative pieces containing fright scenarios about wells having to be shut in permanently, massive impacts on global oil supply and other silly theories that don’t even deserve mentioning here.

By early October, reality had set in, and we learned that the ultimate impacts on overall production due to Harvey were actually very small: a net reduction in September production of less than 8,000 barrels of oil per day when compared with the month of August. While this represents the first monthly downturn in overall Eagle Ford production in more than a year, it is tiny when considering that producers had initially shut in wells representing more than 400,000 barrels per day.

By the end of September, less than a month after flooding and winds from Harvey had forced them to shut down operations, all previously shut-in refineries had also returned to full or near-full capacity. As the San Antonio Express-News’ Jennifer Hiller reported on Oct. 9: “The Energy Department said Thursday that one Gulf Coast refinery was in the process of restarting, and a few others are operating at a reduced rate. ‘Although refinery activity in [the] Gulf Coast remains down from pre-storm levels, activity has returned to levels typical for late September/early October,’ the report said. ‘Gulf Coast ports have largely returned to normal operations, though some restrictions remain.’”

This is a phenomenal result when one considers the fury and immensity of Hurricane Harvey and the manner in which it lingered around southeast Texas for the better part of a week. We’ve always known the oil and gas industry is innovative.

We’ve known it is competitive, that it pays good wages, that it creates lots of economic activity and high-paying jobs. We’ve known it pays lots of taxes that benefit our local and state governments. But Hurricane Harvey — and the temporary disruptions it created in the industry — reminds us just how important oil and gas are to our daily lives and provides us with a great lesson about the industry’s strength and resilience. With any luck, many years will pass before the next natural disaster or supply disruption forces us all to learn these lessons all over again.

 

About the author: David Blackmon is Associate Editor for Oil and Gas for SHALE Magazine. He previously spent 37 years in the oil and natural gas industry in a variety of roles, the last 22 years engaged in public policy issues at the state and national levels. Contact David Blackmon at [email protected].

 

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