Hurricane season brings an increased risk to transportation energy in the United States, both from a supply and price perspective. FreightWaves spoke with Brett Wetzel, senior manager of applied knowledge for Breakthrough to understand the broader impact of Hurricane Florence.
“A storm of this magnitude 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,” Wetzel explained.
“The current path of Florence does not involve significant energy infrastructure, such as oil refineries, offshore oil platforms, or energy marine terminals. 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,” he stated.
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, according to Breakthrough.
“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,” Wetzel said.
Thinking back on last year’s hurricane season, Wetzel noted that “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.”
Wetzel explained that “Harvey constrained the 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¢ 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,” Wetzel concluded.
The Breakthrough team will continue to monitor the situation.