A reborn Tropical Storm Harvey threatens Gulf, sending gasoline higher

Tropical Storm Harvey is certain to strengthen and likely to take aim at the Gulf of Mexico coastline later this week, a prospect that has already sent spot gasoline prices higher.

Harvey has a 100 percent chance of becoming at least a tropical depression as it moves over the warm waters of the Bay of Campeche in the southern Gulf of Mexico about 150 miles west of Merida, Mexico, the National Hurricane Center said in 8 a.m. update. The agency may begin issuing tropical storm and hurricane watches later Wednesday. Harvey initially formed last week east of Barbados before being torn apart by wind shear.

The Gulf Coast from Corpus Christi, Texas, to Lake Charles, Louisiana, is home to nearly 30 refineries – making up about 7 million barrels a day of refining capacity – and is in the path of heavy rainfall expected to start as early as Friday. Flooding poses risks to operations, while torrential rains can shut units and cause supply disruptions.

“The most likely scenario is it will be a tropical storm,” said Bob Henson, a meteorologist with Weather Underground in Boulder, Colorado. “It needs to be watched.”

Wholesale gasoline prices jumped in Houston on Tuesday as suppliers stocked up in anticipation of potential outages at refineries or fuel distribution centers. Conventional 87-octane gasoline rose 0.8 percent to $1.5630 a gallon, while premium prices increased 1.8 percent to $1.6983.

“Depending on the severity of the storm, fuel purchases at the rack typically increase and nonessential staff are evacuated from terminals, which could lead to supply shortages,” Mansfield Oil Co., a Gainesville, Georgia-based fuel distributor, said in an emailed alert.

There could also be problems for cotton growers if heavy rains fall on the plants as the bolls are starting to open, said Don Keeney, a meteorologist at MDA Weather Services in Gaithersburg, Maryland.

Should Harvey recover its strength, it will be in the Bay of Campeche where conditions are conducive for storm development, Henson said. State-run Petroleos Mexicanos said it has no plans to evacuate offshore oil rigs and gas platforms in the area though it will continue to monitor the storm.

A reformed Harvey could crash into the coastline anywhere from northeast Mexico to southern Texas and spread flooding rains as far north and east as Louisiana, especially if the storm stalls off the coast, Henson said.

As much as 16.5 inches of rain could fall in south eastern Texas, particularly in the area of flood-prone Houston, said the U.S. Weather Prediction Center in College Park, Maryland. As the storm comes together, it will be easier for computer models to track its likely path.