How Hurricane Harvey could hit Canada's gas prices

Saturday, August 26, 2017, 3:43 PM - As the remains of Hurricane Harvey slam Texas with strong winds and potentially up to a metre of rain, Canadians should keep an eye on the fuel pumps over the coming days.

That's because Texas is home to a large proportion of North America's oil refineries, and hit to the region's supply has knock-on effects reaching well north into Canada.

"A disruption in the United States, even though it has nothing to do with the weather here in Canada, does affect us whether we like it or not," Dan McTeague, a senior petroleum analyst at GasBuddy.com, told The Weather Network Saturday.

That's historically been true, and weather impacts in the U.S. routinely impact gas prices in Canada just over the regular course of a season. 

WATCH BELOW: How and why U.S. weather affects Canada's gas prices

More extreme events have even bigger cross-border effects. In 2008, Hurricane Ike's hit on the U.S. Gulf ended up translating into an average 12-cent spike at the pumps north of the border, McTeague says.

As for Harvey's impact on Gulf oil infrastructure, McTeague says it's likely to be considerable.

"The simple numbers are that at least 25 per cent of U.S. total gasoline and diesel production is likely to be offline, won’t be back online until the storm settles and the associated flooding can be dealt with," McTeague says.

But McTeague says it's too soon to tell exactly what the final price could end up being, as the storm is very much still in progress and it's not yet clear how bad the hit to refineries will be. The picture won't start becoming clearer until Monday morning when the markets start assessing the damage to supply, with effects likely not felt until Wednesday.

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"It’s an evolving story, and it may very well mean, if there are to be major price increases, they’ll be spread out over several days. But I have a sense that this time next week, we’ll have a pretty good idea what the cost will be, and for how long," McTeague says.

And as for what those effects may be, McTeague says it ranges from a price spike of as much as 15 cents per litre, to an increase of just a few cents, as this season has been good for production and gasoline futures have so far been strong.

"If the damage is limited to, maybe, 10 refineries, other refineries could come out of short-term production cuts, then the damage will be assessed as being temporary and it’s likely if any increases happen, they will be short-lived," he says.