Potentially active hurricane season could affect fuel, oil

May 29, 2024

Land Line Staff

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If hurricane season forecasts hold true, a shift in recent fuel price trends could follow.

Weekly reports from the Energy Information Administration, ProMiles.com and AAA, all show a national average diesel price per gallon below $4. These reports have also shown a steady decline in the average diesel price for the past several weeks.

However, the National Weather Service is predicting “above-normal” hurricane activity from June 1 through Nov. 30.

Fuel analysts say if there are 17-25 named storms as predicted by the National Oceanic and Atmospheric Administration, disruptions of crude oil production and refinery operations are a distinct possibility.

“Offshore crude oil in the United States is concentrated in the Gulf of Mexico and could be significantly limited by inclement weather,” according to EIA. “Floating production units must contend with some of the most severe hazards associated with hurricanes and tropical storms. They must have emergency procedures to evacuate nonessential personnel and temporarily halt production.”

Refineries in Texas and Louisiana account for almost half of the country’s refining capacity. These refineries are susceptible to the flooding and power outages associated with major storms and hurricanes.

EIA said because of the total volume of refining capacity in either region, more than 1 million barrels per day could be temporarily taken offline in anticipation of a major storm.

Outside of local consumption, hurricanes can also disrupt the supply chain of petroleum products. For example, Florida’s fuel supply is primarily shipped on barges from Gulf Coast refineries. Hurricanes and/or tropical storms could lead to disruptions in barge transfers.

Natural gas operations

Crude oil is not the lone market that could see adverse effects of an active hurricane season.

Natural gas production could also be reduced and liquefied natural gas export operations interrupted. The 13 billion cubic feet per day of LNG export capacity in the U.S. is located on the Gulf Coast making it vulnerable to hurricanes and other severe weather.

Electrical and marine infrastructure damage are a greater concern at LNG facilities with more layers of protection in place.

EIA pointed to Hurricane Laura in 2020, which halted LNG exports at the Sabine Pass and Cameron facilities in Louisiana.

“With another active hurricane season approaching, NOAA’s commitment to keeping every American informed with life-saving information is unwavering,” NOAA Administrator Rick Spinrad, Ph.D., said.

NOAA said it will utilize new tools for hurricane analysis and forecasting this season and is upgrading its observation systems. LL

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