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by Matt Muenster
Matt Muenster

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Hurricane Ian Freight And Fuel Market Impacts | Advisor Pulse

September 28, 2022

Matt Muenster
by Matt Muenster

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Hurricane Ian is expected to make landfall in Florida by early afternoon. In a time of already volatile fuel prices and disrupted freight networks, a market shock like a hurricane can have a profound impact. In this Advisor Pulse, the Breakthrough Applied Knowledge team analyzed past hurricanes to anticipate the energy and freight market impact of Hurricane Ian.

The Impact of Hurricanes and Other Shocks

The projected strength and path of Hurricane Ian are similar to Hurricane Irma (2017). We expect Ian to have similar fuel market impacts in the Southeast U.S. Shocks to fuel market infrastructure can result in an upward hike for fuel prices. Thus far, the energy market impact of Hurricane Ian has been limited to the closure of offshore crude oil production and the temporary disruption of shipping energy products from the U.S. Gulf Coast. It is worth noting that on average, major hurricanes that affect infrastructure have a 15.6 cent price spike. Depending on the extent of damage caused by Ian, we can expect price spikes of up to 20 cents a week after impact.

Hurricane Ian Freight And Fuel Market Impacts | Advisor Pulse

Hurricane Ian Diesel Market Expectations

A market shock, like a hurricane, can have a profound impact on the market. During the harshest events, like Hurricane Harvey, prices in the U.S. Gulf Coast and Northeast United States spiked because of the direct impact of offline energy infrastructure. This had also led to spikes in the national wholesale diesel price and smaller differentials between wholesale and retail diesel prices.

Historically, we see evidence of category 4 and 5 storms representing a 13 to 20 cent per gallon wholesale diesel premium during the week they make landfall as compared to the average price a month earlier. This upward price pressure may be driven by the shutdown of offshore oil production and/or disrupted refinery operations.

A category 4 or 5 storm along the Texas Gulf Coast offers the greatest upside price risk. Additionally, any potential shutdown of the Colonial Pipeline due to preventive storm measures or storm damage would spike Northeast U.S. diesel prices.

Hurricane Ian Freight Market Expectations

Ian has the potential to have freight impacts similar to Irma . Across the Breakthrough ecosystem of shippers, inbound Florida freight volumes averaged a 26 percent decline from the previous four weeks during the week Hurricane Irma made landfall. Inbound volumes during the following week exceeded the prior four-week average by 13 percent. There is a strong possibility of similar regional freight behavior given the projected size and path of Hurricane Ian.

Hurricane Ian Freight And Fuel Market Impacts | Advisor Pulse

Hurricane Irma had a negligible impact on freight volumes in states neighboring Florida. Unless Hurricane Ian’s path moves farther west, it is reasonable to expect a similar experience.

The Ports of Tampa Bay and St. Petersburg closed on 9/27, and the Port of Jacksonville will close at noon on 9/28. It is not certain if the much larger container terminals at the Ports of Savannah and Charleston will experience closures. The storm is currently expected to be downgraded to a tropical storm by the time it reaches Georgia.

Breakthrough will continue to monitor the situation and provide updates upon release to this blog.

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