Monday, September 27, 2021
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Economic and logistical casualties of Harvey

🕐 4 min read

Fort Worth has sent resources to assist with relief efforts in the wake of Hurricane Harvey, but the devastation in Houston has just begun to trickle into the Fort Worth area in subtle ways. Given that the Dallas-Fort Worth area and Houston are two of the top logistics hubs in the United States, some turbulence among industries is to be expected.

“I think one thing to consider in this whole situation is that when you look at ports in the United States, … Houston and Dallas are in the top five. Houston is actually just slightly above the Dallas-Fort Worth area,” said Brian Sauser, associate marketing and logistics professor at the University of North Texas.

“So when you think about the significance of the impact of [Harvey], you have to consider that two of the largest ports in the United States are in Texas,” he continued. “So it has a major impact on what happens, not only in the state of Texas, but nationally. When you’re talking about the impact that this can have for the logistics and even just the economy, it’s pretty significant.”

The Southeast Texas coast is home to 23.5 percent of Texas’ population and 25 percent of total Texas jobs, according to a study conducted by The Perryman Group in 2015. However, Sauser said, it’s hard to tell what Houston population displacement totals will be like.

“The displacement of people is profound and I think maybe Katrina would be as close as you can get. I don’t think we’re going to see that same effect here because one of the differences between Katrina and what happened here is that Katrina was a hurricane and people evacuated,” Sauser said. “This was essentially a flood caused by a tropical storm and most people did not evacuate, and they didn’t evacuate because there’s probably almost zero data points in history that Houston has seen anything close to this. … All the data said, ‘This doesn’t happen.’”

Counties along the Texas Gulf Coast make up “a significant proportion of overall business activity in Texas” and account for about 33.4 percent of Texas’ real gross product, the Perryman study states.

The floodwaters have affected private logistics companies such as BNSF Railway Co., based in Fort Worth. Washed out railways have affected the railroad’s operations in the Houston area. According to a statement by BNSF, the company has “suspended all traffic into or out of Houston.” The BNSF command center “is in frequent communication with local, state and federal emergency personnel to evaluate conditions and determine when operations can safely resume.” Amy Casas, BNSF’s director of corporate communications, did not release any information on BNSF’s Alliance railyard in particular.

A residual effect of Harvey that will be highly visible to motorists is the sudden hike in gas prices.

“People in Fort Worth should expect for fuel to become slightly more expensive for a while,” said Travis Tokar, associate professor of supply chain management at Texas Christian University’s Neeley School of Business. “Industries relying on the supply of chemicals from Houston should expect delays in acquiring those materials, or should leverage alternative sources until this crisis is resolved.”

About a quarter of the oil and gas production in the Gulf of Mexico as well as major pipeline systems are also offline, said Ray Perryman of The Perryman Group. “The combination of lower refining capacity, production, and transportation through pipelines has the possibility of significantly disrupting the supply of oil and gas in the region and even as far away as New England,” he said in a special report.

Retail gas prices climbed as the result of storm disruptions, up 2 cents a gallon on Aug. 30 and 7 cents in the week prior, to a national average price of $2.42 per gallon, according to Gasbuddy.

“In terms of product price increases, it might get worse before it gets better,” said Rob Smith, an energy analyst with IHS Markit.

It could take two weeks or longer before big refineries in the Houston area can recover from the record-setting deluge and resume normal operations. That assumes they didn’t suffer serious damage, which was still unknown.

Perryman said some analysts are expecting increases of up to 25 cents per gallon. He does not expect fuel prices to remain elevated once facilities come back online. – The Associated Press contributed to this report.

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