Harvey’s Second Act Could Drive Up Economic Damage for Texas

As Harvey’s winds die down, trouble for Texas may have just begun with forecasts for unprecedented flooding across the heart of U.S. energy production and in Houston, the nation’s fourth-largest city.

A damaged housing complex in Rockport.

Photographer: Alex Scott/Bloomberg

Harvey smashed ashore as a Category 4 hurricane Friday near Rockport, Texas. One death has been attributed to the storm, which has also halted about one quarter of oil production in the Gulf of Mexico and 5 percent of U.S. refining capacity. Its second act could be worse as Harvey stalls and promises to dump feet of rain onto Texas for the next few days.

“This is catastrophic,” said Greg Waller, a service coordination hydrologist with the National Weather Service’s West Gulf River Forecast Center in Fort Worth, Texas. “When we say record setting it means you cannot use history on your side because the rivers have never been this high before.”

Damage from the initial strike won’t tell the whole story, said Chuck Watson, director of research and development, at Enki Holdings LLC in Savannah, Georgia. “If it was a traditional hurricane it would be a $2 billion storm, maybe $3 billion, but that is not what this storm is about,” Watson said.

Stalled Storm

Harvey was the strongest storm to hit the U.S. since 2004. After making landfall, it has been downgraded to a tropical storm and come to a near-standstill near the town of Victoria, Texas.

The Marathon Texas City Refinery as roads flood.

Photographer: Brendan Smialowski/AFP via Getty Images

Harvey is flooding a region that has a cluster of refineries that process 5 million barrels of oil a day. About 1 million barrels a day of crude and condensate refining capacity in Texas have been shut by companies including Valero Energy Corp., according to company statements, government releases and people familiar with the situation. Its path through the Gulf shuttered 24 percent of oil production, along with the port of Corpus Christi, which ships the largest amount of U.S. crude overseas.

In addition to the energy threat, crops and livestock may struggle to cope with rising waters, while airlines have canceled flights at multiple Texas airports. At least 1,058 inbound and outbound flights were canceled Saturday from Texas airports in Houston, Dallas, Corpus Christi, Austin and San Antonio, according FlightAware, a Houston-based airline tracking company. Another 899 were scrubbed for Sunday.

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At least 252,247 customers were without power across the state, according to a Bloomberg survey of electric utility outage maps. The drop in electricity demand could depress natural gas prices.

Power lines sit collapsed in Rockport.

Photographer: Alex Scott/Bloomberg

Harvey’s position is allowing it to pull moisture-laden air off the Gulf, called a feeder band, which will help keep it alive and promises more moisture for Houston,…

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