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Hurricanes and Their Effects on Gas Prices

  • Gas prices are significantly lower this Labor Day weekend. In fact, President Trump says you have him to thank for the decrease in fuel price by $0.25 compared to Labor Day last year.
  • The NOAA predicts that this year’s hurricane season may see an above-average amount of storms. This could have a direct or indirect effect on the nation’s gas prices.
  • Gas prices are affected by hurricanes especially when the storm occurs in areas in which oil refineries are prominent. Disruptions in oil refinery production can severely influence gas prices.
  • Gas providers will also take advantage of normalized fuel increases caused by hurricanes in order to make the higher prices the standard.

In typical President Trump fashion, he logged on to his Twitter account Saturday to make the following boastful comment: “Enjoy the low gas prices over the Labor Day weekend! My energy policies have made America energy independent while keeping prices low, just like a Tax Cut…”

Trump did make a backhanded comment about the Democrats’ “green” initiative but it’s not pertinent to this discussion. However, POTUS does have a point. According to AAA, this year’s natural gas price average is $0.25 cheaper than last year’s Labor Day weekend. It’s also $0.04 cheaper than the 2017 average at the same time.

Peak Hurricane Season Possibly Above Average

Unfortunately, the good news of lower gas prices may be short-lived if this year’s hurricane season gets worse. Peak hurricane season occurs between June 1 to November 30 but it has the potential to last longer.

In early August, the National Oceanic and Atmospheric Administration updated its predications that 2019 will experience an above-average hurricane season. The NOAA increased its storm prediction of 9-15 to 10-17 with a minimum of 5 that could turn into actual hurricanes with 111 mph winds.

A Hurricane’s Direct Effect on Gas Prices

A hurricane’s effect on gas prices is directly related to the location of the storm. For example, when Hurricane Katrina devastated New Orleans, LA along the Gulf Coast, gas prices increased by approximately $.40 a gallon. Since a lot of the nation’s oil was produced along this region, Hurricane Katrina severely halted production.

In 2017, Hurricane Harvey had a devastating effect on gas prices in Houston, TX by disrupting the state’s oil production. Nearly 3 million gallons of gasoline were lost due to oil refineries in Corpus Christi and Galveston closing over the weekend before the storm hit.

Hurricane Dorian, which slammed into the Bahamas over the weekend, caused fuel shortages in 6 different counties in Florida. This will, without a doubt, create a “supply and demand” situation in which gas prices will stay much higher throughout the hurricane season. Consumers will be requiring fuel quicker than the affected refineries may be able to produce it.

A Hurricane’s Indirect Effect on Gas Prices

Companies are in business to make a profit. No one goes into business with a plan of losing money, even if it’s something they enjoy doing—this is actually the definition of a hobby. Either way, if gas providers see an opportunity to increase gas prices because of a natural disaster, they will.

The tactic here is to offer gas at a certain rate for an indefinite period of time until consumers get used to paying the amount and adjust their budget accordingly. The higher gas price will become the “norm” over time and consumers will no longer notice.

Less Gas Being Produced Near the Gulf of Mexico

There really is no legitimate reason for gas prices to continue to increase. Since 2001, the natural gas production along the Gulf of Mexico has decreased from 25% to 4% in 2017. Therefore, disruptions caused by hurricanes or other severe storms should have less effect on oil production.

Since many gas providers know that a hurricane’s effect on oil production isn’t as prominent as it once was, they need to get more creative. With the winter months right around the corner in which fuel typically gets cheaper because it’s easier to produce, gas companies may take advantage of the hurricane season to recoup finances.

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