The tragic disaster of Hurricane Harvey and the uplifting communal recovery we are witnessing teach us much about how to prepare for nature’s worst and help our neighbors. There are other lessons too, particularly for the energy industry that was so severely impacted in the Gulf Coast region.
The most important lesson is that the United States must permit and encourage energy companies to reinvest in refinery and pipeline infrastructure. Without it, there is always a risk of disruption to the U.S. economy and the basic way of life for most Americans.
{mosads}The situation could have been much worse, and it is a tribute to the industry that the refineries, pipelines, oil producers and ports, resumed activity as quickly as they did after the hurricane. In many cases, refineries came back online sooner than predicted and helped prevent economic dislocation from fuel shortages. However, we can and should be better prepared for future events.
The United States needs more refineries and must update its current refineries. Since 1977, only one new refinery has been built in the United States. This is the case despite the growth of demand for petroleum products and the growth of the domestic crude oil industry, especially since 2008.
U.S. refineries run essentially at capacity most of the time. This means that if one refinery — or several refineries — goes out unexpectedly, other refineries cannot ramp up production to compensate for the loss of refined petroleum products. The U.S. needs additional spare refining capacity to fill demand for refined products and to help alleviate gluts of crude oil that build up. Robust crude oil production means little to motorists, airlines and chemical producers if the crude oil is not refined into products they can use.
At the same time, it is vital to ensure that refinery updates and new construction are fitted to handle the variety of types of crude that the U.S. needs, from different sources such as South America, the Middle East, Canada, as well domestic production. Refineries cannot handle just any kind of crude, so it is critical that the country has the right mix of refinery capabilities. A diverse, redundant energy infrastructure system is the best approach to building resilience.
Federal and state governments would be wise to simplify and make easier permitting of new refineries and refinery renovations, refurbishing and refitting. The American economy and American disaster preparedness would be better served if the industry could more easily build and revamp refineries when it sees an opportunity and a necessity.
The United States also needs better pipeline infrastructure to more easily divert refined product to parts of the country in need. Just as the United States committed to the Eisenhower Interstate Highway System in the 1950s, in part to ensure a rapid military response in case of an attack on the country, the United States must ensure that refined petroleum products can flow freely. Typically, refineries serve certain regions, but in times of emergency it will be vital to transport refined product to different regions, and it is in the interests of the United States to have safe and appropriate infrastructure available. Pipelines remain the safest mode of transportation for crude oil and petroleum products.
After Hurricane Harvey, the Colonial pipeline, a 5,500-mile pipeline that runs from Houston to Linden, New Jersey, was severely disrupted for days, leading to price increases, especially across the Southeast and East Coast. The Hurricane hit Texas and Louisiana, but Delaware actually saw the highest jump in gasoline prices even though refineries operate nearby in the Northeast. Philadelphia (only 58 miles from Dover) has a refinery that produces 335,000 barrels per day, but the primary pipeline from Philadelphia flows west through the state of Pennsylvania to Pittsburgh. Delaware is one of the last stops on the Colonial Pipeline, so it was impacted heavily by Hurricane Harvey.
For private industry, refineries are an opportunity to make more product and more money. Newer and better pipelines and refineries would provide more options for a more efficient market. As a result, if the government gets out of the way and permits construction, private industry will invest in needed refineries and pipelines.
While we are still trying to recover from the destruction caused by Harvey and are now awaiting Irma’s arrival, it is important we not lose sight of how we can strengthen the nation’s energy security and resiliency. Additional refining capacity, with increased geographical diversity and additional pipeline capacity could do much to help us absorb the impacts of disasters like hurricanes.
Federal and state governments would be wise to weigh the value of additional energy infrastructure, and private industry would be wise to make the investment.
Ellen R. Wald, Ph.D., is a consultant on energy and geopolitics and teaches history and policy at Jacksonville University. Wald’s upcoming book “Saudi, Inc.: The Arabian Kingdom’s Pursuit of Profit and Power” will be released in 2018.