Crude oil slid and gasoline futures hit their highest since mid-2015 on Wednesday as flooding and damage from Tropical Storm Harvey shut over a fifth of USA refineries, curbing demand for crude while raising the risk of fuel shortages.
Retail prices for gasoline neared $2.49 a gallon Thursday evening, according the Oil Price Information Service, and are expected to keep rising. Front-month futures contracts for the fuel haven't settled over $2 since July 2015, according to FactSet data.
September heating oil, which also expires at the settlement, rose 7.3 cents, or 4.4%, to $1.711 a gallon.
A view of the nation's largest oil refinery that is waterlogged in the wake of Hurricane Harvey in Texas. Brent for October settlement, which expires on Thursday, fell 6 cents to $50.80 a barrel on the London-based ICE Futures Europe exchange.
Company spokesman Steve Baker said that the pipeline is underwater in parts of Texas dealing with flooding from Harvey and that those sections would have to be inspected before it could resume operating.
"AAA does not expect Gulf refineries to be offline for months", he said.
The combination of the Labor Day holiday, increased demand and the tightened supply levels in the Gulf means motorists in Tennessee are likely to see gas prices increase another 5 to 10 cents in the coming days, according to AAA.
Front-month gasoline futures have soared 13% week to date, and they are on track for a roughly 12% jump in August.
Motiva's massive Port Arthur refinery, the No. 1 refinery in the US that is controlled by Saudi Aramco, began a controlled shutdown early Wednesday due to "increasing local flood conditions".
Harvey has thrown a wrench into the operations of numerous largest USA airlines.
The US Gulf Cost is home to about a third of American refining capacity, much of which is now off line due to the storm and flooding.
Goldman Sachs estimated in its statement issued on Monday that the storm would increase domestic crude oil availability by about 1.4 million barrels a day if the case remained the same.
Colonial Pipeline, which owns the largest pipeline for gas distribution in the United States, said Thursday that deliveries from the hurricane region would be intermittent.
The West Coast price for diesel increased three cents to $2.91 per gallon, the Gulf Coast price rose two cents to $2.43 per gallon, the East Coast price increased almost one cent, remaining at $2.62 per gallon, and the Rocky Mountain region witnessed a jump of less than one cent to $2.72 per gallon.