Power Disruption to Plant and Refineries Lead to Oil Price Jump

Texas City officials have lifted an order for residents to stay indoors, following a power disruption to a chemical plant and three refineries. But the all-clear came too late to head off a fresh jump in the price of oil. Andrew Schneider reports.

Starting Monday night, a series of four power outages shut down production at the BP, Valero and Marathon refineries in Texas City, as well as the city’s Dow Chemical plant. That led benchmark crude oil prices to spike to $112.23 per barrel this morning.

Amy Myers Jaffe of Rice University’s Baker Institute for Public Policy says that, while fighting in the Middle East poses legitimate concerns for oil supplies, power disruptions at refineries should not.

“There’s a surplus of global refining capacity today. This isn’t like 2007, where U.S. refineries were producing flat out and the world’s refineries were producing flat out, and so, God forbid we would lose one refinery for two weeks, it would mean that we’re going to have a major gasoline shortage. I mean, that is just not the case now.”

Barbara Shook is Houston bureau chief for the Energy Intelligence Group. She also says this morning’s jump has more to do with fears than fundamentals.

“It shouldn’t have had any impact on oil prices. This is just irrational behavior in the markets.”

Bio photo of Andrew Schneider

Andrew Schneider

Business Reporter

Andrew Schneider joined KUHF in January 2011, after more than a decade as a print reporter for The Kiplinger Letter...