The likelihood of an especially active Atlantic hurricane season raises concerns about weather-related disruptions in the U.S. oil and gas sector, according to federal energy officials.
NOAA’s official hurricane forecast calls for 17-25 named storms this year, of which 8-13 may become hurricanes. This forecast surpasses the 14-23 range predicted in 2010, making it the largest number of named storms ever anticipated by the agency.
The U.S. Energy Information Administration (EIA) reports that hurricanes primarily impact the oil market by disrupting offshore oil production and refinery operations in the Federal Offshore Gulf of Mexico (GOM). Last year, this region accounted for 14% of total U.S. crude oil production.
“Offshore oil and natural gas 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,” the agency noted.
Refining of crude oil is also significantly affected by hurricanes along parts of the Gulf Coast. Refineries along the Texas and Louisiana Gulf coasts account for almost half of U.S. refining capacity. These facilities are at risk of flooding or power outages during major storms or hurricanes. Like offshore floating production facilities, refineries may be temporarily shut down in anticipation of major storms, and severe damage could lead to permanent closures, as seen in 2021 with ConocoPhillips Alliance Refinery in Belle Chase, Louisiana.
Hurricanes can also disrupt U.S. petroleum supplies in the mid-Atlantic region. For example, the largest refinery on the East Coast, Bayway in New Jersey, operated by Phillips 66, was significantly impacted by Hurricane Sandy in 2012.
In Florida, hurricanes can disrupt supply chains for petroleum products. Although petroleum fuels are not refined in the Sunshine State, the state has significant gasoline demand. During major hurricanes, changes in consumer behavior can lead to temporary spikes in fuel demand, affecting prices due to local supply shortages or panic-buying.
The previous Atlantic hurricane season saw 20 named storms, but only one made landfall in the U.S. None of last year’s storms had a significant impact on U.S. petroleum infrastructure, according to the EIA.
A hurricane in the GOM could potentially decrease natural gas production. However, recent hurricanes have had a limited effect on the overall U.S. natural gas supply due to the continual decline in GOM gas production. “The GOM provided less than 2% of total U.S. marketed natural gas production in 2023, down from 17% in 2005 when Hurricanes Katrina and Rita interrupted significant volumes of natural gas production,” the EIA stated.
Hurricanes can also affect U.S. natural gas demand by disrupting liquefied natural gas (LNG) export operations from the Gulf Coast, which has almost 13 billion cubic feet per day of export capacity. “Although LNG facilities generally have many layers of protection from direct impact, hurricanes can damage electrical and marine infrastructure and hamper ship movement,” the agency adds.
Most recently, Hurricane Laura, which made landfall in August 2020, temporarily halted LNG exports from Louisiana’s Sabine Pass and Cameron LNG facilities.
Extreme weather events, such as hurricanes and arctic blasts, pose significant challenges to oil drilling operations. The 2005 hurricane season, with Hurricanes Katrina and Rita, severely impacted oil production zones in the Gulf Coast, leading to temporary halts and evacuations. Over time, the industry has gained experience and improved technology to mitigate such disruptions, but challenges remain, as seen during the Texas deep freeze of 2021. Experts believe that continuous advancements and legislative changes will help reduce future weather-related disruptions in the oil and natural gas sector.
