Dive Brief:

• Hurricane Harvey, which hit Texas from the Gulf of Mexico as a Category 3 storm over the weekend, ravaged the coast with almost 30 inches of rain and winds reaching up to 125 mph, forcing the ports of Houston and Corpus Christi to close, as well as the George Bush Intercontinental Airport and the Houston Hobby Airport. Railways servicing the afflicted area — including Amtrak, BNSF, Kansas City Southern and Union Pacific — shuttered operations Friday in anticipation of the storm, according to Air Cargo World and Trains.com.
• The Port of Houston announced on its website it will remain closed at least until Tuesday, while the Port of Corpus Christi closed unexpectedly until further notice after an oil drilling ship broke loose during the flooding and sank a tugboat Saturday, according to MySanAntonio.com.
• Exxon Mobil closed its Houston oil refineries Monday, the Houston Chronicle reported. According to the Chronicle, the Texas Gulf Coast provides more than 25% of America's fuel needs. Before Harvey hit, Valero and Citgo closed oil refineries near Corpus Christi. The New York Times reported Tuesday morning that flood waters are expected to "continue rising for days."

Dive Insight:

While the storm was expected to be severe and damaging, the Federal Emergency Management Agency (FEMA) declared Hurricane Harvey a "Major Disaster" on Friday and the National Weather Service tweeted Sunday morning that "This event is unprecedented & all impacts are unknown & beyond anything experienced. Follow orders from officials to ensure safety."

From a supply chain standpoint, Hurricane Harvey is definitely a "major disaster" that will debilitate some companies for weeks, maybe even months. Extensive flooding will keep trains off the tracks and trucks off the roads, and flooding damage to ports may prevent them from reopening for the rest of the week. This means the entire Texas Gulf Coast is shut down until further notice, so despite regular shipments of goods and products being cancelled or delayed, the big impact on the rest of the country will be the closure of the oil refineries.

Supply chain managers and 3PLs should be aware of this even if they don't do business along the Texas Gulf Coast — because that area controls such sizeable chunk of the nation's fuel, expect gas prices to skyrocket over the next month or so.

According to the U.S. Energy Information Administration, refinery costs account for 18% of the final price you see at the pump, and distribution and marketing account for 16%. Because refineries are shut down and air, rail, freight and ships are crippled by the storm, that's 34% of the final price of gas affected.

In order to prepare for the price surge, shippers, carriers and supply chain managers should look for ways to cut costs and consolidate shipments now, and recognize that profits may drop in September.

Besides the effect on gas prices, many shipments may have been lost over the weekend as the storm hit the coast: there's already one video showing a truck driver being rescued from his waterlogged semi, which means there's probably plenty of other trucks stranded and flooded. For companies doing business in the area, it may take a few weeks before all losses are accounted for, which can hamper operations and frustrate customer relations.

While it's very difficult to be fully prepared for a natural disaster, there are steps companies can take to make sure their supply chains recover quickly. As the storm continues to wreak havoc, it's probably still too soon to know how hard Harvey will punch the economy, but companies can start adjusting operations now to soften the blow.