Gas prices have been climbing since the war in Iran began. Now, an explosion at a Valero refinery in Port Arthur has drivers wondering: How much worse could it get?
Richard Talamantez owns and operates Nom Tom Bot HTX in Houston. Like many small business owners, he keeps a close eye on fuel costs — because they hit his bottom line directly.
“It’s something we think about every day,” Talamantez said.
“It’s made the cost of doing business a lot higher and our margins a lot thinner.”
OUR FIRST REPORT: Shelter in place issued for residents in Port Arthur after explosion at Valero refinery
The explosion earlier this week sent plumes of smoke into the air over Port Arthur, a city about 90 miles east of Houston. Residents near the Valero refinery were forced to evacuate, and the blast quickly sparked concerns about what it could mean for prices at the pump.
But Skip York, a nonresident fellow for global energy at Rice University’s Baker Institute for Public Policy, says drivers don’t need to worry, at least not because of this incident.
“I don’t think this incident is going to have a material impact on impacting gasoline prices either nationally, certainly not nationally, not even in Houston,” York said.
What it would take to move the needle
York says the U.S. Gulf Coast refining system is built with a significant amount of flexibility, and a single refinery fire isn’t enough to shake it.
“I think you’d have to have a much bigger outage of not just one refinery, but you’d have to have a whole string of refineries in the Gulf Coast go down before you would really take that flexibility out of the system,” York said. “About almost 50% of the U.S. refining capacity is along the U.S. Gulf Coast. There’s a lot of flexibility built into the system, a lot of these refineries are connected to each other. So if one unit goes down at one refinery, those refineries can move volumes around.”
Valero takes the hardest hit
While consumers may be spared, York says Valero itself faces a significant challenge. He describes the Port Arthur facility as one the company’s largest refinery, and one of its most complex.
“I think there’s really kind of two things they’re doing right now. One is what’s the damage assessment of the particular unit that had the fire, which was a diesel hydrotreater. And then I think their next step is going to be how do they isolate the rest of the refinery from that unit so they can return the rest of the refinery to operations and then deal with the damage and repair the damage at that unit and then get that unit back online,” York said.
The bigger picture
For now, York says the real driver of gas and oil prices isn’t the Port Arthur explosion, it’s the ongoing conflict in Iran. And that pressure on prices will likely continue until that situation is resolved.