Gasoline futures surged on Wednesday to another two-year high and crude oil was down, as flooding and damage from Tropical Storm Harvey shut nearly a quarter of U.S. refinery capacity, curbing demand for crude while raising the risk of fuel shortages. Roselle Chen reports.
Gasoline futures surged on Wednesday to another two-year high and oil was down as damage from Tropical Storm Harvey shut nearly a quarter of U.S. refineries. Muzuho's Bob Yawger: (SOUNDBITE) BOB YAWGER, DIRECTOR OF FUTURES DIVISION, MIZUHO AMERICAS (ENGLISH) SAYING: "This storm has been a worst possible scenario type situation as far as the day to day operations of refineries in the Gulf Coast. Every refinery, every significant refinery, has gone down. The folks trying their hardest to keep Motiva, Port Arthur alive and going. It ran at 40 percent for a while till finally going down also. There was just a gigantic effort to keep that up moving and it failed. The only asset that did not go off line, or at least has not gone off line yet, which is very important, is the Colonial Pipeline, which supplies crude oil, I'm sorry, which supplies gasoline and product to the East Coast from the Gulf Coast. We get over two, we get two and a half - three million barrels a day of a product from the Gulf Coast from the Colonial Pipeline to the East Coast. So, it's open right now and that's a great thing. But if that pipe were to go down, I don't think it will go down, but it, certainly, is a possibility, that, the energy problem becomes not a Gulf Coast problem. It suddenly becomes an East Coast problem also." The growing inventories of crude oil are causing the spread between Brent and U.S. crude to grow. It hit its widest in more than two years on Tuesday before rising slightly to $4.92. Restarting refineries under even the best conditions can take a week or more.