More refinery closures were expected, as parts of Texas have received more than 4 feet (1.2 meters) of rain.
In addition to shutting oil refineries, about 1.4 million bpd of USA crude production has been disrupted, equivalent to 15 percent of total output, Goldman Sachs said.
"At 5 a.m., Motiva began a controlled shutdown of the Port Arthur refinery in response to increasing local flood conditions", the company said in a statement emailed to UPI.
Traders also reacted to reports that it could take several months before all production could be brought back online. It has since soared another 30 cents per gallon and AAA said the Southeast in particular could be facing higher prices at least into September.
Officials with GasBuddy, a fuel tracking website, said the further south in Texas a driver goes, the less gasoline they will be able to find for a while. The pipeline is key to moving gasoline, jet fuel and other refined products to points along the East Coast from Florida to New Jersey.
That said, the lack of cargo out of Houston, which is the second largest port in the USA and handles 14 percent of container traffic in the U.S., will have a major impact as it's a major source of gasoline supply for the U.S. Northeast in general and the New York-New Jersey area in particular. Total SA's refinery in Port Arthur is out with a power loss, a person familiar with the matter said.
At least 3.6 million barrels per day of refining capacity are offline in Texas and Louisiana, or almost 20 percent of total US capacity, based on company reports and Reuters estimates. The reserve's proximity to Gulf Coast refining centers means it can respond to supply disruptions quickly, releasing crude within days of a storm.
An oil refinery is seen before the arrival of Hurricane Harvey, Aug. 25, 2017, in Corpus Christi, Texas.
One option is Homeland Security could grant a blanket waiver for the Jones Act, which requires shipments between U.S. ports to have an American crew and a ship built in the U.S. These requirements can make shipments "quite expensive and cumbersome", Tran said. Congress created it in 1975 amid fears the Arab oil embargo could cause long-term spikes in motor fuel prices that harmed the US economy.
The Colonial Pipeline, a crucial artery in the nation's fuel supply network, runs from the Houston area to NY harbor and includes more than 5,500 miles of pipeline, most of it underground.
"We have been warning about the next tropical development", said Olivier Jakob, an analyst at research group Petromatrix.