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4 Things to Watch for During Hurricane Season

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The end of summer doesn’t necessarily mean the end of Hurricane Season. In fact, according to the last 100 years of data from the National Oceanic and Atmospheric Administration, the peak of hurricane season occurs in mid-September. That means bad weather could still be on the horizon and it could impact your organization, from power outages to your total energy budget.

While you can’t control the weather, you can learn to interpret the warning signs of how hurricanes could impact your organization and energy spending.

1. Path

The path of the storm is the most important aspect to look at when considering whether a hurricane will put people, homes and businesses at risk – and potentially damage energy infrastructure, causing outages, price jumps or delays in production.

If the storm is moving toward production areas, energy infrastructure may be at risk, with the potential for downstream effects on supply and market pricing. In 2005, Hurricanes Katrina and Rita caused extensive damage to drilling platforms and pipelines in the Gulf of Mexico. As a result, production slowed, causing a shortage in supply across the nation. Natural gas prices spiked from $6/mcf to $14.33/mcf in a single month. Following this disaster, U.S. energy markets shifted away from relying as heavily on offshore production, now depending on shale gas for production, a resource that is far from the path of most hurricanes. However, the oil industry continues to depend on offshore production sites, which can mean reduced production during storms.

And the weather doesn’t just affect production; it can also impact energy exports. Because liquid natural gas (LNG) ships in specialized tanker ships from terminals located on large bodies of water, weather events like a hurricane can significantly affect LNG supply. The path and severity of a storm may delay exports by days or weeks.

If production equipment is damaged by a hurricane, decreased supply can also result in price volatility. Because these production areas are often generating energy for regions across the country, production interruptions can affect regions beyond the immediate area of damage. So, even if you’re not in the path of a hurricane, you could be affected by price volatility.

2. Size

The size of a storm can also be a key indicator severity and potential damages. A small storm will cause fewer outages, while larger storms have a wider area of destruction, meaning resources to repair outages may be thin and recovery times longer.

Power outages during a storm inevitably cause a short-term drop in demand. If this occurs simultaneously with a supply shortage due to interruptions in production, the combination can actually create balance and avoid a price spike. This is exactly what happened when Hurricane Harvey hit Texas, taking production offline, but also knocking out power to a quarter of a million people. However, if production facilities are not back online when service is recovered, the rising demand and short supply is a dangerous recipe for a price spike.

3. Speed

Slow-moving storms are more likely to cause widespread flooding than quick-hitting storms. Why? Storms that move slowly may hover over a single region for hours or days, dropping precipitation across the same area. Consider Hurricane Sandy, which, over the course of a week, dropped greater than 10 inches over the Atlantic Ocean and about seven inches from New Jersey to the Carolinas. 

However, fast-moving storms can also cause problems, especially if they are severe enough to require evacuation. In these cases, residents and business owners may not have time to properly prepare, increasing the potential of storm-related damage.

4. Strength

From toppling trees and power lines to hurling debris, wind strength is one of the most damaging and deadly aspects of a hurricane. Hurricane-strength winds are capable of significant and costly damage. Coastal areas are a noteworthy risk because of offshore production and LNG supplies storage. Strong winds may damage production and export equipment, affecting supply. But winds can also damage power delivery equipment, such as power lines, causing outages that impact demand as described earlier.

“Typically, the strongest winds occur when a storm reaches landfall,” says Beau Gjerdingen, a meteorologist at Direct Energy Business. “If you don’t make a full landfall of the eye of any given storm, you generally avoid the strongest winds. In most storms, the strongest winds are fairly concentrated in the eyewall, or very close to the center of the storm.”

Protecting your enterprise from weather events

If your organization is in an area at risk of hurricane damage, you already have to worry about protecting your facility and employees from the storm. But you don’t have to worry about how the next hurricane will impact your energy budget. Our team of energy strategists can help you keep an eye on the weather, insulate your spending from volatile market prices and protect your bottom line.

You can't always predict the weather, but you can prepare for it.

Posted: September 25, 2019