Hurricane Harvey Impacts American Oil Refineries

Hurricane Harvey hit the heart of American Oil Refineries last week. So far (as of 8-31), Harvey has shut down 11.2 percent of American Oil Refineries capacity (about one-third of all American Oil Refineries capacity is in Texas Gulf Coast) and roughly 25 percent of American Oil Refineries’ production from the Gulf of Mexico (accounting for about 20 percent of American Oil Refineries crude production). Harvey also was the cause of closure to all ports along the Texas coast. Based on American Oil Refineries current operations, it is estimated that anywhere from 1 million to 2.2 million barrels per day of refining capacity are offline, as well as just under half a million BPD of production. The U.S. has been producing around 9.5 million barrels per day, and in general, American Oil Refineries production has beaten 2016 Energy Information Administration estimates for 2017 production. This production has played a major role in keeping global oil prices low, in turn hurting oil-dependent countries like Russia and Saudi Arabia.

Situated higher in the Hill Country, Austin has been spared the worst of what Harvey has wrought in cities like Rockport, Houston and Corpus Christi. But it is near enough to the coast that most of us who call it home know someone afflicted by this particular natural disaster. In a way, it has become personal to us. Communities and in the United States, states are absolutely communities are funny like that.

Typhoon Hato, which earned a signal 10 the highest possible rating in Hong Kongs classification system struck the region Aug. 23. The South China Morning Post described it as the worst typhoon that Macau has seen since 1968. Typhoon Pakhar, which earned a signal 8 rating, hit the region a few days later on Aug. 27.

Natural disasters like Harvey and Hato are unpredictable. (Advances in meteorological technology clue us in to general arrival times and broad behavior, sure, but even as late as this week no one could confidently say whether Harvey would turn east or west.) They come quickly and, compared to great plains and mountain chains, leave just as quickly. Put simply, there are things that cannot be accounted for ahead of time. Think about Japans bad luckat the Battle of Midway. Remember Gen. Robert E. Leesmiscalculation at Gettysburg. Recall Mount Tambora, whose eruption in 1815 would destroy crop harvests around the world, giving the world in 1816 what would be known as the Year Without a Summer. Hurricane Harvey, and the concurrent storms of southern China, are serious enough to consider whether they qualify.

There are always circumstances we will not be able to anticipate, and the only antidote for that is to be quick to recognize when those circumstances are upon us and to correct our course accordingly.

American Oil Refineries – A Challenge in Relief

Lets consider, then, the geopolitical importance of the storms that have stricken China and the United States, the largest economies in the world. Well start with China. The importance of these typhoons stems not from the tragic deaths and injuries resulting from the storm although they are indeed tragic. Their importance stems not from the economic fallout sure, itll be a costly reconstruction process, estimated by some to be roughly $1 billion, but China can afford it. Their importance stems not from trade none of Chinas most important trade infrastructure was harmed by Hato and Pakhar. Their importance does not even stem from location though the most affected areas, Hong Kong and Macau, are vital to Chinas economic interests, they serve mostly as a means to access capital markets. It is easier to rebuild a broken stock market than a broken port.

No, the geopolitical significance of these storms results from the political situation they created. In between landfall of the two typhoons, 1,000 Peoples Liberation Army troops left their garrison in Macau and took to the streets, at the behest of Macaus chief executive, to assist with clean-up operations. Though Macau is part of China, it boasts an autonomous government, so the deployment of troops is no small matter.

Of course, disaster relief is not the same as a military invasion, and the deployment can hardly be seen as an act of aggression. But it brings into relief one of Chinas most pressing political challenges: managing its special administrative regions. Over the past week in Hong Kong, one such region that is particularly suspicious of Beijings intentions, tens of thousands of protesters demonstrated against the arrest of democracy advocates. Though technically a separate issue from the situation in Macau, many protesters believe the troop deployment sets a precedent for losing more of their own autonomy. (Tellingly, Hong Kong reporters have been banned from entering Macau.) Its unclear whether their suspicions have any merit, but Beijing certainly wants to enhance its control over these territories, and the typhoons have given Beijing pretext to deploy troops.

American Oil Refineries – Severe, but Short-Term

Hurricane Harveys impact on American Oil Refineries production will be temporary, even if it is severe. In the short term, though, it could be globally significant. The storm has stalled out over Houston and promises to dump more and more rain over the area. If it damages the Colonial Pipeline which transports more than 40 percent of the Texas Gulf Coasts refined product, according to the EIA U.S. consumers would not only have to pay more at the pump, but U.S. policymakers would have to deal with Russia, which would greatly benefit from even a momentary spike in prices. It wont be clear what will happen to oil prices until we know what kind of damage coastal facilities have sustained, but the possibility of higher prices cant be ruled out.

Storms such as Harvey introduce unknown variables into our model. We cant predict them, but we can design our model to account for them when they happen. And why wouldnt we? Nation states tend to act differently when they stare down the ultimate geopolitical power: nature itself.

Precision Electric is now repairing and replacing all damaged equipment for American Oil Refineries in Texas. This is in hopes of getting American Oil Refineriesback on their feet in a timely manner. Many of the American Oil Refineriesuse Eaton VFD products on their rigs and Precision Electric is familiar and experienced in repairing Eaton equipment; Precision Electric has been working with American Oil Refineries in Texas for nearly ten years.Contact Precision Electric for repair and replacement quotes.

References: as well as portions of article are from anarticleby Jacob L. Shapiro of GPF