Market Update: Hurricane – September 2017
The year of the hurricane!
For the first time in recorded history two category 4 hurricanes have hit the US mainland in one season and they came in 16 days apart and in the first half of hurricane season. How will this impact commercial energy budgets?
The answer is twofold depending on the type of business. By now, assuming you filled up your vehicle recently, you had to dig deeper into your pocket as gasoline prices have jumped over 25% since Harvey hit the Houston area. The reason for this is over 20% of US refining capacity is located in the area impacted by Harvey. The Houston area is also the center of the US petrochemical industry many of which are off line and may remain off line for a period of time. Petrochemicals are used in the manufacturing process of a broad array of consumer products ranging from shampoo to milk jugs.
Hurricane Impact Factors to Consider
Depending on the length of the outages, expect to see some inflationary pressures in a broad range of consumables.
Thankfully, for those businesses engaged in business lines other than transportation, “The shale revolution”, has come to the rescue of your energy budget! Believe it or not, the state of Pennsylvania is the nation’s largest producer of natural gas. Prior to the shale revolution, the mere thought of a hurricane in the Gulf of Mexico would send shutters throughout the entire energy complex. Today, after a series of two back to back category 4 hurricanes, natural gas prices are basically unchanged from pre Harvey levels. So take a deep breath and exhale a sigh of relief.
Energy Costs of Severe Weather
Now that we have calmed down, there are concerns regarding what appears to be a pattern of frequently occurring severe weather events. It seems like 100 year events seem to occur on a monthly basis. The best thing to do is take the advice of the Boy Scouts and, “Be Prepared”! Don’t be lulled to sleep by a docile energy market. As an energy procurement professional, when I hear the controversial words, “Climate Change”. I think of severe weather swings. For example, “Polar Vortex”.
The Polar Vortexes of the winters of 2014 & 2015 was the last time we witnessed really painful volatility. Those businesses that were lulled to sleep blew through their annual budgets by March!
Here we are again; two cat 4 hurricanes, no volatility. If you are feeling drowsy, REMEMBER THE VORTEX!
Call NJGEC today to get prepared for whatever old man winter throws your way!