Monday, July 21, 2008
The 2008 Hurricane Season and oil/nat gas prices...
About 25% of US oil production and nearly a third of US natural gas production occur in the Gulf of Mexico region. Close to half of Mexican oil production is centered around the Gulf of Mexico as well. Given that Mexico is currently the third largest supplier of crude to the US any disruption of their production is a major problem as well.
During the phenomenally active 2005 season, Nearly 80% of US. Gulf oil production was taken offline for the better part of a month, due to the series of severe storms that occurred that year. That was in an era when prices were lower, around $60 a barrel, now with prices at better than twice that amount, it is frightening to imagine what such a disruption could do to oil and nat gas prices. We may soon get to find out though.
The NOAA, uses the Accumulated Cyclone Energy or ACE measure to express the activity of both individual storms and entire Hurricane seasons. ACE is a measure of the kinetic energy utilized by a storm and is calculated every 6 hours of the storms lifecycle. The Higher the ACE number the more severe and longer lasting a storm is. The most severe storm season in history was the 2005 season with a total of 248 ACE units. Since 1950 the average for ACE units in a year has been 102.3, so this illustrates the level of activity we had in '05.
Currently the 2008 season has all the makings of another big storm year. There have been 4 named storms already and the month of July (which is not over yet), currently has seen 30 ACE units already. That makes it the 4th most active July recorded behind only 2005 (60.4 ACE units), 1916 (48.5 ACE units) and 1933 (34.0 ACE units), with 1933 being well with within reach in the next 10 days. All of those seasons had at least 5 MAJOR Hurricanes and were very active.
In short, if you want some advice, RUN don't walk to lock in a Nat Gas price right now. You will undoubtedly avoid price spikes that will occur if supply is sufficiently disrupted by the weather. Also I recommend looking into carpooling or transit as get to work options, for you'll want as little exposure spiking to oil prices as possible as well. You can thank me later.
During the phenomenally active 2005 season, Nearly 80% of US. Gulf oil production was taken offline for the better part of a month, due to the series of severe storms that occurred that year. That was in an era when prices were lower, around $60 a barrel, now with prices at better than twice that amount, it is frightening to imagine what such a disruption could do to oil and nat gas prices. We may soon get to find out though.
The NOAA, uses the Accumulated Cyclone Energy or ACE measure to express the activity of both individual storms and entire Hurricane seasons. ACE is a measure of the kinetic energy utilized by a storm and is calculated every 6 hours of the storms lifecycle. The Higher the ACE number the more severe and longer lasting a storm is. The most severe storm season in history was the 2005 season with a total of 248 ACE units. Since 1950 the average for ACE units in a year has been 102.3, so this illustrates the level of activity we had in '05.
Currently the 2008 season has all the makings of another big storm year. There have been 4 named storms already and the month of July (which is not over yet), currently has seen 30 ACE units already. That makes it the 4th most active July recorded behind only 2005 (60.4 ACE units), 1916 (48.5 ACE units) and 1933 (34.0 ACE units), with 1933 being well with within reach in the next 10 days. All of those seasons had at least 5 MAJOR Hurricanes and were very active.
In short, if you want some advice, RUN don't walk to lock in a Nat Gas price right now. You will undoubtedly avoid price spikes that will occur if supply is sufficiently disrupted by the weather. Also I recommend looking into carpooling or transit as get to work options, for you'll want as little exposure spiking to oil prices as possible as well. You can thank me later.
