Calm Before The Storm?

As this week marks the second anniversary of Hurricane Katrina, residents of the Gulf Coast can’t help but remember how destructive Mother Nature can be at times. While there have been a fewer than average number of hurricanes this season so far, the recent destruction that Hurricane Dean wreaked also served as a reminder that the energy markets face numerous potential hazards when trying to meet customer demands. Refining operations in the US Gulf have faced other obstacles as well that have left some capacity offline and subjected the industry to heightened risk in the face of any storms. In addition, gasoline stock levels are lower than they were at this time last year, as shown in the chart below. Recent draws have pushed stocks lower by 6% since July alone, and levels seem to be headed toward the lows seen during the aftermath of the 2005 hurricane season.