NEW YORK: Gasoline futures surged on Wednesday to a two-year high while crude oil was down, as flooding and damage from Tropical Storm Harvey shut almost a quarter of US refinery capacity, curbing demand for crude while raising the risk of fuel shortages.
US crude fell 42 cents to $46.02.
Worldwide benchmark Brent crude was up 58 cents, or 1.1 percent, at $51.44 a barrel.
Gasoline prices fell for the first time in nearly two weeks, after rising 25 percent last month, as traders assessed the impact of Tropical Storm Harvey.
Tropical Storm Harvey's effect on the energy industry has spread beyond flooded USA refiners as fuel pipelines are also shut, threatening a supply squeeze around the country and roiling world markets as traders scramble to find alternative supplies.
Texas is home to 5.6 million barrels of refining capacity per day, and Louisiana has 3.3 million barrels.
The nationwide average was already higher than most experts had given as a worst-case scenario when flooding from the devastating storm began knocking out refineries along the Texas Gulf Coast a week ago.
Refinery, pipeline and logistical problems on the Gulf Coast are expected to squeeze fuel supply delivery volumes to the Southeast, Midwest and Mid-Atlantic.
The transportation issue was underlined Thursday, when the U.S. Energy Department announced that it would release a total of 1 million barrels of crude to Phillips 66's Lake Charles, La., refinery in an effort to ease gasoline supply shortages.
"I think we would be very comfortable tapping into that and providing that alleviated resource", homeland security adviser Tom Bossert said as quoted by Reuters.
Slipping production after a major storm is not unprecedented: US output slipped after Hurricane Dennis in 1999, Hurricane Ivan in 2004 and Hurricane Katrina in 2005, forcing a range of industry and government reactions.
US gasoline futures rose as high as $2.1705 per gallon for the first time since 2015, while Energy Secretary Rick Perry warned that pump prices would rise. US crude settled down 48 cents, or 1 percent, to $45.96.
Texas Gov. Greg Abbott tried to reassure drivers that there is plenty of gasoline.
The price rise reflected the concentration of so much of the U.S. oil refining industry in the state of Texas where it was hit hard by the record-setting hurricane, Bohanon explained.
On Wednesday, industry sources told Reuters that Shell staff are reboarding the Perdido oil and gas platform in the Gulf of Mexico in preparation for a restart. Tankers carrying millions of barrels of fuel have been rerouted to the Americas to avert shortages. That means pumps will be intermittently run out of gas, till they can get more fuel trucked in from large storage terminals that get fuel directly from refineries along the Gulf Coast.
West African crude differentials were steady as strong margins countered Harvey's impact.