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Greg Lesko of Lesko Financial Explains the Financial Impact of Hurricane Harvey

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BINGHAMTON, N.Y. -

Bryanna:  The financial impact of Hurricane Harvey will continue for months but one expected problem hasn’t played out as predicted. Greg Lesko of Lesko Financial explains.

Greg: Hurricane Harvey knocked at least 10 refineries offline and has crippled oil production in the Texas gulf. Gasoline futures-- which reflect wholesale prices to gas stations, spiked over the weekend and settled higher at the beginning of this week. Drivers are already feeling it at the pump, with as much as a 3 three to seven cent per gallon increase in a week… and maybe more price jumps to follow. But one financial marker bucking this trend is the price of oil.
Normally, with a disaster of this type in a critical refinery region, you’d expect to see oil prices go up as well and that’s what analysts predicted. Yet crude oil prices have actually fallen this week.    

Bryanna: Why hasn’t the price of oil gone up?    

Greg: To answer that, you have to go back to the basic law of supply and demand. Yes, Harvey interrupted the production of about 380-thousand barrels per day in the gulf and about 400-thousand barrels per day inland. But the hurricane has also cripple Houston the fourth largest city in the U.S. that means much lower demand for gasoline for cars, trucks and airplanes. And lower demand, means lower prices.

Bryanna: Will this continue?

Greg:  F.G.E., an energy consultant, estimates that ongoing flooding from the hurricane could slash oil demand in the region by as much as 150-thousand barrels per day. In addition, the U.S. shale oil boom has increased production by so much that the country has enough crude oil to soften the blow from Harvey.