Hurricane Florence gains strength and is projected to hit the Carolinas as a Category 3 or 4 storm overnight Thursday, September 12th.
Florence is predicted to be the strongest storm to hit the Carolinas in over 20 years, with over 1.5 million people in areas with evacuation warnings. Hurricane Florence’s path has been revised in the past 24 hours to move south into Georgia, prompting an emergency declaration from Georgia’s governor for the entire state.
From an energy perspective, the storm is likely to cause localized diesel supply and price disruptions, as extreme weather impacts the downstream distribution of refined products to fuel stations and truck stops. The current path of Florence does not involve significant energy infrastructure, such as: oil refineries, offshore oil platforms, or energy exporting hubs. The area is primarily supplied by the Colonial Pipeline system, which carries gasoline, diesel, and other refined products from Houston refineries through the South and up the East Coast. Barring any disruptions or outages on the Colonial Pipeline, the overall diesel price impacts at the pump from Hurricane Florence should be limited in magnitude and in geographic reach. The chart below shows the daily wholesale price movements for diesel fuel from coastal states where Florence may make landfall and the national average from a September 3rd baseline. The states depicted have shown slight premiums compared to the national average that remain under 3 cents per gallon.
Hurricane season brings an increased risk to transportation energy in the United States, both from a supply and price perspective.
Just over a year ago, Hurricane Harvey hit the Texas Gulf Coast and created a significant disruption for diesel and gasoline alike. Many will remember the devastation Harvey caused in the Houston area, as over 50 inches of rainfall led to widespread flooding in the region with damage estimates exceeding $100 billion. From an energy standpoint, the heavy concentration of oil refineries in the Houston-area led to over one-quarter of the country’s overall refining capacity being taken offline at the height of the storm’s impact. Harvey constrained supply of gasoline and diesel within the Texas market during the storm, but energy supply shortages spread through multiple regions served by Gulf Coast refineries, like the Southeastern US. Constrained supplies also led to price premiums across the entire United States due to the energy supply chain disruptions, which totaled over 20 cents per gallon to the national wholesale average within the first week following Harvey’s landfall in the Houston-area and lingered for weeks after the storm.
The graphic below depicts oil refinery infrastructure in the United States. As you can see, the Houston-area impacted by Harvey in 2017 has a high density of refineries compared to Florence’s path in the Southeast, which has a single small refinery in Savannah, Georgia which is configured for higher asphalt production.
For further questions on the impacts of Hurricane Florence to the diesel market, please contact the Applied Knowledge Team at AppliedKnowledge@breakthroughfuel.com.