The devastating flooding in Texas in the wake of Hurricane Harvey will cause pain at the pumps across North America for the next few weeks, according to Dan McTeague, senior petroleum analyst with GasBuddy.
McTeague predicted “steep price hikes” in Canada and the U.S., as Hurricane Harvey, now downgraded to tropical storm Harvey, wreak havoc in a region that is key to America’s oil-refining industry.
“With a portion of total U.S. gasoline production shut due to the prolonged effects of Hurricane Harvey, Canadians should expect a noticeable increase beginning this Wednesday,” the analyst said in a note on Monday morning.
Vancouver, Victoria and most of B.C. can expect an increase of three cents a litre, McTeague wrote. Calgary, Edmonton, Regina, Saskatoon and Winnipeg will likely see prices climb between three and eight cents a litre. In Toronto and most of Ontario prices will probably rise five cents a litre. Montreal is in for the steepest hike, at 15 cents to about $1.279 a litre by mid-week. In the Maritimes and Newfoundland prices will rise by five cents a litre.
WATCH: Hurricane Harvey is already affecting the gas supply in Canada, which is boosting demand.
Texas is home to a quarter of U.S. crude oil refining capacity and some areas are expected to receive a year’s worth of rainfall in a week.
So far, Harvey has knocked out about a tenth of the country’s refinery capacity, BMO economist Sal Guatieri wrote in a research note this morning.
“The damage could worsen if continued rains extend the flooding,” he added.
Harvey has knocked out a quarter of oil production from the Gulf of Mexico, prompting fears it could overturn years of excess U.S. oil capacity and low prices.
“Although the full impact of the storm’s damage is yet to be determined, the markets expect the impact will be felt globally and affect energy markets for many weeks,” an analyst at FxPro said in a note.
The storm will bring more torrential rain in the Gulf of Mexico and the battered Houston area over the next few days, according to the Weather Channel.
Isolated outbursts could bring up to 127 centimetres of rain by later this week, the weather forecast reads.
Harvey also clipped U.S. oil production, with five per cent of the country’s output shut down by the storm, Guatieri noted.
WATCH: The aftermath of Hurricane Harvey
Storms sends loonie slightly higher
For Canadians at least, sharply higher prices at pump come with a small silver lining. Concerns about the impact of the storm on U.S. energy infrastructure and overall economic growth, in fact, has helped push the U.S. dollar, propping up the loonie as a result.
The Canadian dollar had already crossed the 80 cents mark against the greenback on Friday, following statements by U.S. Federal Reserve chair Janet Yellen that disappointed investors. News of the devastation in Texas helped push the Canadian currency even higher in early trading on Monday morning.
WATCH: Incredible raw video captures full force of Hurricane Harvey as it hits
The impact of the storm on U.S. economic growth in the third quarter of the year (the July to September period) will depend on the length of the refinery and oil production shutdowns and the extent of the damage to the regional energy infrastructure, wrote Guatieri.
U.S. economic growth more than halved in the quarter after Hurricane Katrina mauled Louisiana in August 2005, but bounced back by early 2006 as reconstruction began and gasoline prices moderated.
– With files from Reuters