As a general rule, I always warn friends and family to make sure their vehicles have full tanks of gasoline if I see a risk developing in the gasoline supply chain. One such risk is a tropical storm or hurricane that enters the Gulf of Mexico. 

The risks from these storms are two-fold. One, there is a lot of offshore oil production in the Gulf of Mexico. To be specific, of the 9.1 million barrels per day (BPD) of U.S. oil production in June, 1.6 million BPD (17.6%) came from the Gulf of Mexico. A storm in the area can shut in oil production in the Gulf, and it can close ports needed to import oil — potentially causing shortages and driving prices higher.

But a far bigger threat comes from the amount of U.S. refining capacity on the Texas and Louisiana coasts. According to the Department of Energy (DOE), 45% of U.S. refining capacity is on the Gulf Coast.

The DOE has been providing daily updates as the Gulf Coast energy infrastructure attempts to return to normal operations. Over the weekend they provided this map from the Energy Information Administration (EIA) that shows the vulnerability of the U.S. refining sector to a major hurricane that sweeps up the Texas and Louisiana coasts:

Note the massive refineries are located around Houston. Motiva’s 603,000 BPD refinery at Port Arthur is the nation’s largest refinery, while ExxonMobil’s (NYSE: XOM) 560,500 BPD refinery in Baytown in the country’s second largest. Both are still shut down as a result of the storm.

But it isn’t just that there was flooding in the refineries. The Federal Emergency Management Agency (FEMA) has estimated that at least 156,000 properties have been affected by the floodwaters of Hurricane Harvey. The dark red in the image below from FEMA means a home has been destroyed.

The extent of the damage across such a wide area is unprecedented in the U.S. I fully expect that this will be, by far, the most expensive storm in U.S. history. It seems that the insurance sector is about to take a big hit.

Note the damage to personal property right where the major refineries are located. (The nation’s 6th largest refinery is located in Lake Charles, Louisiana — also heavily impacted by the storm). As a result, even when the refineries can start back up, it’s going to take a while to be able to operate at full rates as they struggle with staffing issues as people are trying to rebuild their lives.

Returning to the advice I provided in the first paragraph, the impact at the pump has been swift and significant. Gasoline prices spiked in many areas of the country, but in Texas, many service stations simply ran out of gas. 

Here is a map, courtesy of GasBuddy.com, showing the extent of the outages in the Dallas area over the Labor Day weekend. Red means no gasoline, and many stations that did have gasoline had long lines of cars waiting to refuel:

This column is of course supposed to be for investors, but I think it’s important for people to realize what’s happening in Houston. It has probably impacted your pocketbook even if you are far from Houston, and I want you to understand the reasons.

It’s going to take years to rebuild Houston, and it’s going to require contributions from many sectors. As people rebuild their lives, they are going to need new furniture, carpet, home furnishings, and automobiles.

An estimated 500,000 automobiles were lost to the storm, worth about $4.9 billion. It seems companies like General Motors Company (NYSE: GM) and Ford Motor Company (NYSE: F) should do brisk business on the Gulf Coast over the next few months. 

Home improvement companies like Home Depot Inc (NYSE: HD) and Lowe’s Companies, Inc. (NYSE: LOW) are going to be inundated with customers along the Gulf Coast.

The infrastructure challenges in Houston will be formidable. Construction companies like Houston-based Sterling Construction Company, Inc. (NASDAQ: STRL) — which has already seen its share price jump nearly 30% — should have a backlog of orders for the foreseeable future. 

There are fewer opportunities in the refining sector related to the hurricane. Some will benefit if their refineries weren’t impacted, but most major refiners were impacted by this event. Most refiners have seen shares move higher in response to the hurricane, but the gasoline market is likely to return to normal over the next few weeks.

For future reference, if you are east of the Rocky Mountains I would advise you to make sure you have plenty of gasoline in your tank if a hurricane threatens — especially one in the Gulf of Mexico.