Keeping An Eye On The Hurricanes

7 Sep 2018; 

This week, tropical storm Gordon, the first major weather event of the 2018 hurricane season, carved through the eastern Gulf of Mexico, making landfall just west of the Alabama-Mississippi border on Tuesday night.  While this storm caused minimal property damage, it was a poignant reminder of the risks facing the significant (and growing) energy sector in the U.S. Gulf.  One year ago, Hurricane Harvey, the most powerful storm to hit the U.S. in more than a decade, made landfall on the central Texas coast and severely disrupted oil production and refining operations in the region.  More than 300,000 barrels per day (b/d) of offshore oil production was taken offline and an estimated 3 million b/d of refining capacity was shut down.  We cannot predict how disruptive this year’s hurricane season is going to be, but with the continued growth of the oil & gas infrastructure in the U.S. Gulf, any significant storm hitting the Gulf Coast increases the risk of disruption to the oil and tanker markets.    Hurricanes are not an exclusively American or Atlantic Basin phenomenon.  The Western Pacific Basin (where they call the most powerful storms typhoons rather than hurricanes) has had its share of tropical storms.  This week, Japan was struck by typhoon Jebi, the worst storm to strike the country since 1993.  China, Korea and the Philippines are also regularly hit by typhoons.  However, no region in the world has such a large concentration of energy infrastructure in one place as the U.S. Gulf region.  That is why storms that happen there have much more of an impact on the oil and tanker markets.

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