Already, people around the country are feeling the effects of Hurricane Harvey with increased prices for gasoline, but that’s just the beginning, and experts warn the impact on Oklahoma could have already begun.
With 30 percent or more of the nation’s refining capacity offline, oil producers have no choice but to cut back on production, according to Tom Seng, Applied Assistant Professor of Energy Business and Assistant Director of the School of Energy at the University of Tulsa.
“The impact on oil and gas companies – and let’s just even talk about oil and gas companies just in Tulsa – I mean, the mere fact that refineries are cutting back on the amount of crude that they’re refining, that gets backlogged into the pipelines,” Seng told KRMG Wednesday.
And with so many pipelines shut down in the Gulf Coast area, crude storage facilities like those in Cushing have nowhere to send the oil and natural gas.
“We know that based on the logistics of all of this, that there are going to be oil wells that cannot pump, because there’s no place to put that oil at the moment, and we’re talking like even back in west Texas, certainly in Oklahoma,” he said.
Compounding the problem, many storage facilities have been nearly at capacity for some time.
“At Cushing we have a backlog. What’s going on out in the field? Well out in the field, there’s a lot of these oil wells that won’t be able to pump into respective pipelines that are even going to Cushing. So, the ripple can be absolutely tremendous.”
This is all bad news for Oklahoma, which relies heavily on gross production taxes to fund state government.
A cut in production means a loss of tax revenues for a state that has had a series of revenue failures and is currently considering a special legislative session to address another gap of about $215 million.
Seng said the longer-term effects of Harvey will be global.
“From Corpus Christi up and around to Mobile Bay, (this is) the world’s largest petroleum refining and petrochemical manufacturing corridor,” he said. “We have a whole plastics industry, pharmaceuticals, everything else. They receive their feed stock from refineries down there.”
And many of those petrochemical plants are also shut down due to the damage from Harvey.
Much like the refineries, it will take some time to determine the extent of the damage, and to assess how long it will take to get them up and running again.
When it comes to the overall economic fallout from the storm, Seng said, “I think this one is going to have probably a much further-reaching impact than any one we’ve ever seen before.”