SINGAPORE (REUTERS) - Prices of gasoline, or US petrol, hit US$2 a gallon for the first time since 2015 on Thursday (Aug 31) as flooding from tropical storm Harvey knocked out almost a quarter of US refineries, while crude oil prices fell again on the resulting drop in demand.
Harvey has battered the US Gulf coast since last Friday, ripping through Texas and Louisiana at the heart of the US petroleum industry. At least 4.4 million barrels per day (bpd) of refining capacity was offline, or almost a quarter of total US capacity, based on company reports and Reuters estimates.
Fearing a gasoline supply squeeze, US gasoline prices on Thursday jumped to US$2 per gallon for the first time since July 2015.
Crude prices, by contrast, fell as the closure of so many US refineries led to a slump in demand for the most important feedstock for the petroleum industry.
US West Texas Intermediate (WTI) crude futures were trading at US$45.91 per barrel at 0212 GMT, down 5 cents, or 0.1 per cent, from their last close. International Brent crude was down 8 cents, or 0.2 per cent, at US$50.78 a barrel.
"The flooding from Hurricane Harvey shut the largest refinery in the US, 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 per cent of the ... currently offline capacity could remain unavailable for several months," the bank said.
Meteorologists said that Harvey could be the worst storm in US history in terms of financial cost.
"The economy's impact, by the time its total destruction is completed, will approach US$160 billion," said Joel N. Myers, president and chairman of meteorological firm AccuWeather.
Other estimates have put the economic losses from Harvey at under US$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."