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Call of the week: Why some refiners will get a boost as Harvey hits competitors

While Wall Street strategists are trying to grasp the financial and economic impact of Hurricane Harvey, companies are working tirelessly to reopen their businesses after the most powerful storm to hit Texas in half a century crippled the region.

Record rainfall flooded homes, forced businesses throughout the region to close and destroyed up to 1 million cars, according to automotive data firm Black Book. Accuweather predicts the storm will likely be the most expensive natural disaster in US history, costing the economy about $190 billion.

One sector that’s having a hard time getting back on its feet is the energy sector. Houston is the heart of the US energy production, and Harvey’s destruction forced about 30% of US refining capacity to shut down, according to IHS Markit. The supply disruption sent gas prices surging to the highest level in two years. According to AAA, the national average of regular gasoline is now $2.45, up 10 cents from just a week ago.

Energy companies suffering the most from Hurricane Harvey’s devastation are those with the most exposure to Texas oil basins. More than a dozen refineries were forced to curtail or suspend their production, including ExxonMobil (XOM), Royal Dutch Shell (RDS-A), Phillips 66 (PSX), Valero (VLO) and Marathon Petroleum (MPC).

While this is causing a huge disruption to the energy markets, refiners with limited production impacts associated with Harvey could register higher profits in the short term. How? The disruption means strong profit margins for refiners that can fill the gap. The gasoline crack spread, which measures the price difference between crude and gas prices, hit a two-year high this week.

In a note to clients, Goldman wrote Andeavor (ANDV), Delek US Holdings (DK), HollyFrontier Corp. (HFC) and PBF Energy (PBF) are four key stocks that “should realize higher near-term refining margins.”

Refineries unaffected by Harvey will have the advantage of pricing their fuel based on the Gulf Coast market’s benchmark prices.

But the bump in business for some of these stocks might not last long. Goldman cautions that it sees “limited impact on long-term earnings power.”