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Hurricane Harvey: Counting America’s energy cost

By Sonny Atumah

For over one week from August 25, residents of two Gulf of Mexico states of Texas and Louisiana were greeted with another hurricane named Harvey. Although the Gulf States are not strange to tropical storms, Harvey turned out to be one of the worst natural disasters in the United States. One’s heart goes to the victims as well as the people of America in the disaster that claimed 30 lives with millions displaced in sorrows and tears.

Irma
An aerial photography taken and released by the Dutch department of Defense on September 6, 2017 shows the damage of Hurricane Irma in Philipsburg, on the Dutch Caribbean island of Sint Maarten.
Hurricane Irma sowed a trail of deadly devastation through the Caribbean on Wednesday, reducing to rubble the tropical islands of Barbuda and St Martin. / AFP PHOTO

The severe tropical storm with torrential rain recording 51.88 inches in downtown Houston, and extremely strong winds struck the heart of the nation’s oil and gas industry. That the looming disaster of storms like hurricane Harvey could not be predicted meant that mother nature may never be conquered even with a marvel at meteorological technology.

Hurricane Harvey swamped the gulf coastal cities in Texas including Houston, Rockport and Corpus Christi, Port Author, Galveston, Baytown, Beaumont as well as Orange, Lake Charles and others in Louisiana. The worst hit was Houston which is the global oil and gas capital and the fourth largest city in the United States. It may be a matter of conjecture the reports that cities were scattered with debris in the wake of the hurricane Harvey’s fury.

Although it may be too early to count the cost of Harvey to the American economy the damage to the coastal facilities was colossal.  Hurricane Harvey took its toll on energy demand-supply balance and infrastructure because Texas’ oil and gas account for 65 percent of energy that powers the US$18.5 trillion global number one economy. Unconfirmed figures estimated losses of about US$190 billion in destroyed property, lost wages and disrupted business in what has been described as the costliest natural disaster in America.  Texas Governor Greg Abbott said that his state may need more than US$125 billion for rehabilitation.

While touring areas affected by Harvey for the second time in four days of the disaster (September 2), President Donald Trump as the comforter-in-chief, reassured victims that federal resources would be deployed in the rebuilding process adding that he had sought for Congress approval of US$7.9 billion in disaster relief funding as part of initial request for funds. Trump visited a makeshift kid zone set up with toys and activities for the many displaced children at the NRG Centre in Houston.

The storm shut down 14 oil refineries and 13 petrochemical plants in Texas, causing damage at some plants that released harmful chemicals. The Texas’ gulf Coast refines one third of the United States crude oil of which 11.2 percent was shut down by hurricane Harvey. Experts believe it would take weeks before refineries return to full operation with an estimated 4million barrels per day; bpd refining capacity taken out from the products market.

It is reported that major gulf Coast to East Coast pipeline has been shut because of inadequate products to supply, with inventories expected to be drawn down. With all ports along the Texas coast closed over 5million barrels per day of oil, gas and fuel exports to Mexico and other Latin American markets have been affected. The West Texas Permian Basin sweet crude was not affected but the major pipelines that bring different crudes to the refineries and ports pass through Houston and that affected shale producers. It means that producers may have to discount their sweet crude temporarily.

Most petrochemical plants that have been shut down may not come back until October or November. It has  serious consequences on the American economy. Jack Kaskey quoting Hassan Ahmed, an analyst at Alembic Global Advisors said that with Harvey’s floods;  about 61 percent of U.S petrochemicals were affected.

Ethylene is a major building block in the petrochemical industry. Process plants turn it to polyethylene, the world’s most common plastic, used in garbage bags and food packaging. When transformed into ethylene glycol, it is the antifreeze that keeps engines and airplane wings from freezing in winter, and it becomes the polyester used in textiles and water bottles.

Texas alone produces nearly three-quarters of the country’s ethylene for plastics essential for consumer and industrial goods, and diapers. Ethylene is an ingredient in vinyl products such as PVC pipes, life-saving medical devices and cushy sneaker soles. It helps combat global warming with polystyrene foam insulation and lighter, fuel-saving plastic, auto parts and synthetic rubber found in tyres.

It is an ingredient in house paints and chewing gum. Ethylene and its derivatives account for about 40 percent of global chemicals. Hurricane Harvey would affect ethylene plants globally because the U.S. accounts for one of every five tons on the market.

Harvey has affected the petrochemical industry and cities infrastructure of the Gulf States. The oil production in the Gulf States has contributed to lower global oil prices. Low crude oil production would mean reduced oil inventories and a rise in prices. Experts believe the natural disaster would have been an advantage to oil dependent nations of OPEC and Russia, but there is no shortage of crude oil in America because inventory was already very high before Hurricane Harvey.


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