The total damage amount from Hurricane Harvey is still being calculated and the final number may not be uncovered for a few more months. However, preliminary totals show that the oil industry may be the most impacted market in all of Houston.
Texas Is Home to the Largest Oil Refinery in the Nation
Saudi Aramco, the largest energy company in the world, owns Motiva Enterprises, which is the largest oil refinery in the United States. This refinery happens to be 110 miles east of Houston in Port Arthur. When Hurricane Harvey hit, Motiva Enterprises had to close for almost two weeks. When work operations resumed after the storm, the refinery could only start with 40% of their max production. Motiva Enterprises ran at less than maximum production for possibly a month or more, but even the two weeks where operations ceased were enough to bring the oil refinery business in the United States to a crawl.
Motiva Enterprises is able to refine 603,000 barrels of crude oil a day. Even if the refinery were out of commission for only 10 days, that would be an estimated 6,030,000 barrels of refined oil lost from the oil market. This loss of production would amount to $11,258,010 in refined oil disappearing from the market. This doesn’t even account for the loss of production when Motiva Enterprises started back up again below maximum production.
Suppliers & Buyers from World Markets Make Transactions Differently than Consumers
When a consumer goes to a store and buys a loaf of bread, their purchase is a “final sale.” However, the wheat that made the bread may have been sold and purchased four times before a consumer finally purchases it for the last time. So a consumer’s purchase is the last link in a market scenario, but Motiva Enterprises’ sales and purchases are critical to an oil business “chain.” There are crude oil sellers who depend on Motiva Enterprises to buy their oil and there are refined oil buyers who depend on Motiva Enterprises’ refined oil products. In these market relationships, there are contracts to uphold and deadlines to meet. When a business fails to meet a deadline or cannot fulfill their contract (regardless of the reason), other buyers and suppliers who rely on that business may turn to more “reliable” venders and purchasers. All this to say, Motiva Enterprises lost more than $11,258,010 because of Hurricane Harvey: they lost trust as a company. Despite the fact that Hurricane Harvey was out of the company’s hands, other corporations may not trust Motiva Enterprises in the future because of the refineries propensity to flood. It is bad to lose profit, but it is even worse to lose partners in the world of business.
Are Companies Able to Recover Profits from Floods?
Absolutely! Many Houston companies believe that their flood insurance only covers damages done to facilities, but that it not true. Many corporations have insurance coverage that includes recovery of lost profit, compensation for the actual costs of running the business, and restitution for the expenditures that a business incurred while trying to set-up their new operation. Companies like Motiva Enterprises could possibly be insured for their $11,258,010 oil losses in addition to their building damages.
If you are a business owner and are planning to accept an insurance amount without knowing what you are truly entitled to, contact us immediately. An insurance company’s goal is to payout as little as possible when disaster strikes. If they can get you take an offer that covers only property damage when you are entitled to profit-loss compensation, they will do so. Arnold & Itkin’s commercial insurance lawyers are ready to provide you with a free consultation concerning your insurance claim. We will do our best to make sure that you are compensated for everything that your claim is supposed to cover.
Call (888) 400-2101 now to get the most out of your insurance claim!