In 2016, the energy sector performed at its very best and was in fact the strongest S&P performer with a huge return of 24 percent. The OPEC was able to cut a deal that would alleviate some of the oil excess and prices soared to around $50 a barrel. Everyone in the oil industry was excited about the future of oil stocks. Investors were hopeful that Big Oil would make a sweeping comeback in spite of the advancement of alternative energy. But by June of 2017, crude oil prices had plunged by 20% and there was again a glut of oil sitting, waiting to be used up.
These are the issues that usually affect our local gasoline prices. No one ever factors in Mother Nature and her destructive power. With the recent hurricane in South Texas, the glut of oil just sitting, waiting to be used up, is suddenly disappearing. It’s almost as if the Big Oil companies ordered up Hurricane Harvey for this very purpose. Though their offshore rigs and Houston refineries were damaged, in the end, this major hurricane is causing a steady rise at the pumps. And that will eventually put billions of dollars in the pockets of Big Oil.
The national average for gasoline was about $2.18 a gallon before the storm. A week after hurricane Harvey, the price had risen to $2.39 a gallon. In Texas, where people are panicking in the wake of the largest storm to hit the U.S. in 56 years, the price of a gallon of gas at one station was $8.01. Though authorities are promising to put a stop to price gouging, there’s no telling how many gallons of that $8 gas will be sold before they do.
Meanwhile, in cities as far away as Dallas, people are driving from one gas station to the next in search of that precious gasoline to run their cars. How will everyone get to work if all the stations run out? Many of them have. They cannot keep up with the demand in a state as big as Texas once millions of drivers panic.
Imagine the impact if you work out of a cargo van or truck where you carry tools, equipment and workers each day. Even a 40 cent rise in one gallon of gas can really hurt your budget. Many tradesmen such as electricians, plumbers, and HVAC installers, must travel hundreds of miles per week in and out of homes and businesses on service calls.
In the past, big natural disasters have wreaked havoc with supply and demand for months before things could level off and go back to normal. As thousands of emergency workers prepare to head to South Texas soon to rebuild the infrastructure, supply and demand will increase even more. While there may be a lot of money to be made as Houston and South Texas rebuilds, the prices of gasoline or even a simple cheeseburger can take a chunk out of your paycheck.
Hurricane Katrina had many things in common with Hurricane Harvey. They made a direct impact on an expansive seaport where millions of tons of goods go in and out of the country each year. Both storms damaged and/or destroyed oil rigs, refineries and offshore platforms. Katrina’s final price tag was $109 billion, but Harvey is forecast to be higher than that. In fact, some experts believe the total cost of the storm could reach $200 billion.
So many things are uncertain about America’s future, but one thing that holds true is that we eventually pull ourselves up by our bootstraps, go back out there in the world and rebuild whatever the storm has torn down. That is already happening in South Texas. Thousands of people are packing and getting ready to go. Nurses in Dallas are being offered $40 per hour with all the overtime they can handle. Electricians and linemen are being offered over $100 per hour to go. Yes, you will have to leave your family and be gone for months but you could earn enough to pay off all your bills and what self-respecting American can turn down a deal like that?
It will be long, hard work and you can expect to pay too much for a gallon of gas, a hotel room or a cheeseburger, but in the end, we will come together as a nation and do what has to be done. We will rebuild.