Gasoline prices hit $2 a gallon for the first time since 2015 on Thursday as flooding from storm Harvey knocked out almost a quarter of U.S. refineries, while crude prices stabilised following a slump the previous day.
Harvey has battered the U.S. Gulf coast since last Friday, ripping through Texas and Louisiana at the heart of the U.S. petroleum industry. At least 4.4 million barrels per day (bpd) of refining capacity was offline, or almost a quarter of total U.S. capacity, based on company reports and Reuters estimates.
Amid fears of a supply squeeze, U.S. gasoline prices on Thursday jumped to $2 per gallon for the first time since July 2015.
"The flooding from Hurricane Harvey shut the largest refinery in the U.S., pushing gasoline prices to a two-year high. In contrast, oil prices retreated," ANZ bank said.
Goldman Sachs said it could take several months before all production could be brought back online.
"While no two natural disasters are similar, the precedent of Rita-Katrina would suggests that 10 percent of the ... currently offline capacity could remain unavailable for several months," the bank said.
Crude prices stabilised after falling sharply the previous day as the closure of so many U.S. refineries has resulted in a slump in demand for the most important feedstock for the petroleum industry.
U.S. West Texas Intermediate (WTI) crude futures were trading at $45.96 per barrel at 0414 GMT, flat from the last day`s settlement, when prices fell by 0.8 percent intraday. International Brent crude was at $50.88 a barrel, also virtually flat from its last close, though the contract fell by over 2 percent during the previous session.
Analysts said that the heavy WTI discount with Brent was a result of shut in U.S. crude supplies due to pipeline and refinery closures.
Meteorologists said that Harvey could be the worst storm in U.S. history in terms of financial cost.
"The economy`s impact, by the time its total destruction is completed, will approach $160 billion," said Joel N. Myers, president and chairman of meteorological firm AccuWeather.
Other estimates have put the economic losses from Harvey at under $100 billion.
And although Harvey keeps getting weaker, meteorologists say more floods are expected.
The National Hurricane Center (NHC) said in its latest update that flooding and heavy rain continued in eastern Texas and western Louisiana.
AccuWeather also said that "the worst flooding from Harvey is yet to come as rivers and bayous continue to rise in Texas with additional levees at risk for breaches and failures."
Beyond Harvey, U.S. commercial crude oil stocks fell by 5.39 million barrels last week, to 457.77 million barrels, according to data released Wednesday by the U.S. Energy Information Administration.
That`s 14.5 percent down from record levels reached last March, and it is below 2016 levels.
This came on the back of record U.S. gasoline demand of 9.846 million bpd last week, and as U.S. refining utilization rates rose to 96.6 percent, the highest percentage since August of 2015.
However, the data was collected before Hurricane Harvey hit the Gulf Coast.