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Hurricanes, Oil and Pump Prices


It may not be apparent yet, but decreasing oil inventory stocks and record demand for gasoline across North America may soon link up with a potentially active hurricane season to complete the perfect trifecta of higher pump prices over the coming weeks.

Earlier this week, GasBuddy took notice of not one, but three storms developing in the Atlantic that could be a sign of an active and dangerous hurricane season, thanks in no small part to a warmer ocean. In fact, records stretching back to 1950 have found that 2017 is on track to have the warmest ocean temperatures which are conducive to significant oceanographic activity.

This explains why seven named storms have already morphed into two hurricanes well before the arrival of the most intense period of hurricane activity. But that’s not all. While warm ocean temperatures are the lifeblood of tropical storms, dry air and wind shear from as far away as the Sahara Desert, which normally serves to stunt storm development in the Atlantic basin and the Caribbean, are less pronounced this summer.

The potential threat of hurricane season, which is thought to reach its most dangerous period from August 20th onwards has enormous implications for both offshore natural gas and oil operations which number in the hundreds throughout the Gulf of Mexico, as well as Gulf coast refineries stretching from Texas to Alabama; home to half the refined products consumed in the U.S.

Though the science in early storm predictions can never be totally accurate, a milder season in the northeast, could help prevent damaging hurricanes from making landfall, as was the case with last week’s Hurricane Gert, which veered away radically from the eastern seaboard of both the U.S. and Canada, to the relief of many.

Still the formation of three disturbances off the coast of West Africa and likely to enter water tropical waters of the Leeward islands and the Gulf of Mexico give cause for concern that at least one could be a growing concern this time next week. Should this be the case, look to a temporary rise in crude prices and potentially longer support for pump prices, recalling that in September 2008, Hurricane Ike closed many Gulf Coast refineries which saw a temporary surge of 15 to 20 cents a gallon and a 12 cent a litre bump in Canada.

After Monday’s lunar eclipse, all eyes will be focussed on developments in the Atlantic over the next several weeks until the beginning of November.

Senior Petroleum Analyst, Canada

Dan is a skilled and noted bilingual (French and English) consumer advocate specializing in energy and current affairs. Known as Canada's “Gas Guru,” he founded to better help motorists anticipate the price of gasoline in advance across Canada. He has over three decades of experience in the petroleum industry, as a parliamentarian and an analyst.