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Texas Refineries Could Take Two Weeks To Fully Restore Operations After Storm
Texas Refineries Could Take Two Weeks To Fully Restore Operations After Storm
Most refineries on the U.S. Gulf Coast have begun procedures to restart operations that were disrupted by the massive winter storm late last week, but a full return to normal output of motor fuels could take up to two weeks for some facilities.
The freezing temperatures affected refinery equipment and caused issues at the steam and co-generation units at some refineries, sources with knowledge of the situation told Reuters on Wednesday.
Pemex’s Deer Park refinery and Motiva Enterprises’ Port Arthur, the biggest refinery in the United States, could see their restart stretched out to the first or second week of January, sources familiar with the refineries’ operations and schedules told Reuters.
Winter Storm Elliott led to hard-freeze warnings issued for all the states along the U.S. Gulf Coast, where most of the U.S. refining capacity is located.
As of Friday, December 23, as much as 1.5 million bpd of the Gulf Coast’s refining capacity was shut down due to the freezing temperatures, per Reuters estimates.
Refineries run by Motiva Enterprises, Marathon Petroleum, and TotalEnergies outside Houston were shut late last week. Operations at other refineries in Texas, run by ExxonMobil, Valero Energy, and LyondellBasell, were also disrupted by the severe winter storm.
In total, the extreme winter weather affected some of the output at refineries along the Gulf Coast that process a combined 3.58 million barrels per day (bpd) and deliver around 20% of U.S. motor fuels.
Last week, the national average gasoline price dropped for a seventh consecutive week, but it’s not certain this week will bring another decline in gasoline prices, due to the rally in oil prices and the refinery outages due to the storm, according to fuel savings app GasBuddy.
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Oil prices are down, gasoline prices are not. What gives?
It’s a good summer to be selling gasoline, not a great one to be buying it
In mid-February, the price of oil hovered around $50 US a barrel, and a litre of gasoline cost, on average, $1.01 Cdn.
This week, the price of oil is hovering around $50 a barrel and the average price of a litre of gasoline is $1.22. A few small things have changed over that five-month period: the Canadian dollar is lower by about three cents; Alberta has added a four cent tax to gasoline bought in that province.
But the big difference is that refineries are making a killing this summer.
Refining margins are the difference between the cost of crude oil and the cost of wholesale gasoline.
‘We’re at that part of the summer where demand for gasoline is never going to be stronger.’ – Stephen Schork, Schork Report
Both Canadian and U.S. refining margins are running at seven- and eight -year highs. In Canada last month, the refining margin was 27.7 cents per litre according to data compiled by Michael Ervin of the Kent Group.
“We’re at that part of the summer where demand for gasoline is never going to be stronger,” said Stephen Schork, editor of the Schork Report, which is focused on commodities.
“We’re at the height of the northern-hemisphere peak-demand season.”
Demand for gasoline is high
Demand for gasoline is indeed very high this summer. According to the U.S. Energy Information Administration, gasoline demand is nearly seven per cent higher than it was a year ago. That’s a significant increase.
Refiners are going full steam right now, at over 90 per cent capacity, in order to keep up with demand.
