The winter storm that is pummeling Texas with record snow and low temperatures could spark an increase in gas prices, experts said on Tuesday.
Several oil and gas production centers across the Lone Star State have had to curtail production or completely close due to the power outages, including Motiva in Port Arthur, the largest refinery in the country.
In addition to the shortage of power, Texas refineries are cutting down energy usage in order to preserve energy for millions of homes without power. As of Tuesday afternoon, more than 3.9 million Texans remain without power, according to PowerOutage.US.
Andy Lipow, the president of Lipow Oil Associates, told CNBC that the issue amounts to an “electric generating problem,” adding that the problem is “temporary until the weather warms up.”
“You don’t have natural gas, and you don’t have electricity,” he said. “It’s difficult for refiners to turn crude into gasoline.”
The rise in gas prices expected by experts comes after a 5-cent-per-gallon increase for unleaded gasoline over the past week, pinning the national average at $2.51 per gallon, according to AAA. This amounts to about 7 cents more than prices a year ago before the coronavirus pandemic.
Tom Kloza, the global head of energy analysis at Oil Price Information Service, told CNBC that he thinks about 4 million barrels of refining capacity are offline in Texas and other states, adding that the U.S. was operating at 80 percent of its 18 million barrel capacity before the storm.
“I believe they’ve had orderly shutdowns,” Kloza told the network. “They haven’t had any damage or anything knocked out. My guess is this is like a blip in the system, but it’s not a big deal.”
The Electric Reliability Council of Texas (ERCOT), the state’s grid operator, called for rotating power outages on Monday morning amid the storm to manage the high demand for electricity.
Critics have slammed Texas officials and ERCOT for its management during the winter storm. Texas Gov. Greg Abbott (R) has requested the state legislature investigate ERCOT due to the widespread outages.