Hurricane Harvey could push up natural gas prices this winter

Hurricane Harvey, already driving up gasoline prices in Colorado and other states, has the potential to circle back and hit consumers with higher home heating costs this winter.

It all depend on how long oil and gas production along the Gulf Coast remains out of commission, and to what degree natural gas stockpiles deplete ahead of the peak winter heating season.

“It is probably too early to tell what impact Hurricane Harvey will have on natural gas prices locally, for both generation and for the upcoming winter heating season,” said Mark Stutz, spokesman for Xcel Energy.

Colorado’s largest utility has already locked in most of the natural gas supply it needs for the winter heating season, and its suppliers are local and regional, boosting the odds they can deliver on their contractual promises.

Harvey is on track for several more days of torrential rains.

S&P Global Platts

Harvey is on track for several more days of torrential rains.

Xcel Energy doesn’t expect much of an impact on heating prices in the region, “unless there is a very significant and long-term loss of production over the next several weeks or months,” Stutz said.

Futures markets for natural gas on Friday were initially sanguine about the storm. Prices actually dropped on reduced natural gas demand due to widespread power outages. But power is also needed to process and move natural gas and markets awoke to the severity of supply disruptions on Monday, pushing up futures prices slightly.

Texas accounts for a quarter of the nation’s natural gas production, and the storm has impacted about half of that total. Offshore platforms, the first to shut down, look like they will bounce back fairly quickly. It could take longer for producers in the Eagle Ford Shale, who aren’t as accustomed to swimming in water.

But the gas needs to go somewhere. Several significant pipelines have had to shut down in the region and natural gas processing capacity in eastern Texas is down by 40 percent, according to Platt’s Analytics.

About three-quarters of the homes in Colorado burn natural gas for heat, according to the U.S. Energy Information Administration. And Colorado exports far more natural gas than it consumes, meaning producers here could get a bump if prices do rise.

That isn’t the case with gasoline. The storm has forced the shut down of 10 refineries along the Gulf Coast, taking 2.2 million barrels of gasoline production, according to S&P Global Platts. Houston and surrounding ports remain closed, eliminating two key entry points for 1.9 million barrels of oil a day, as well as another 418,000 barrels of refined products.

Colorado’s two refineries, owned by Calagary-based Suncor, feed mostly on local oil, which is light, as well as some much heavier Canadian crude to produce gasoline, distillates and asphalt, said Paul Newmarch, a spokesman for Suncor.

“The majority of the refined products are sold to commercial and wholesale customers in Colorado and Wyoming,” Newmarch said. That retail network includes 35 Shell-branded stations, 7 Exxon stations and 2 Mobil stations in the state.

Colorado counts on refineries in Wyoming, Kansas and Texas to fill in the gap. Even before the storm, gasoline inventories in the Rocky Mountain region were at their lowest levels of the year, further adding to pressure on prices, according to AAA Colorado.