Hurricane threat shifts to Eastern U.S. as Gulf Coast dodges a strike

(Bloomberg) — The risk of a hurricane strike is shifting to the U.S. East Coast and the Caribbean as the storm season enters its final weeks, with the threat of a blow to the western Gulf this year all but disappearing.

In mid-October, the fast-flowing air current known as the jet stream starts to sink lower across North America, making it difficult for a hurricane to slam into Texas and Louisiana, said Paul Walker, a meteorologist at AccuWeather Inc. Though storms that form at this time of year can still be dangerous — 2012’s Superstorm Sandy was one — they aren’t a threat to homes and businesses on the oil-rich western Gulf Coast.

No year is a good one to have a major storm cripple U.S. Gulf crude and gasoline output, but the impact in 2022 could have been disastrous. Pump prices have jumped since snapping a 98-day streak of declines in September, driven in part by unplanned refinery shutdowns on top of seasonal maintenance. Gasoline inventories are near the lowest since 2014. U.S. diesel and heating oil stockpiles have dwindled to record lows for this time of year.

“Product stocks are already very low, especially diesel,” said Amrita Sen, co-founder and director of research at London consultancy Energy Aspects Ltd. “We have not managed to build going into the winter. A hurricane would have made a bad situation worse.”

Fuel stocks are so low that if a major hurricane had struck along the Gulf Coast, the “U.S. would have stepped in and banned” product exports, Sen said. The White House is already weighing restrictions on overseas sales of gasoline, diesel and other refined products as a way to boost U.S. stockpiles and force retail prices lower.

At this time of year, the origin point for hurricanes shifts away from a stretch of the Atlantic between the eastern Caribbean and the west coast of Africa, an area where the most powerful and deadly storms on record are born. Instead, late-season storms typically crop up in the western Caribbean. From there, they may spin harmlessly into the Atlantic — or menace the West Indies and the U.S. East Coast.

The last year the Gulf was spared even a tropical storm strike, which can knock out large amounts of production for days at a time, was 2014.

U.S. crude stockpiles, including the emergency Strategic Petroleum Reserve (SPR), are already sitting near the lowest levels in two decades. SPR inventories are currently hovering around the lowest in 38 years. A storm-driven production cut would have quickly sent shock waves through a market already prone to extreme moves due to poor liquidity and heightened geopolitical tensions.

“Any hurricane entering the Gulf would have further exacerbated the product situations,” said Andy Lipow, president of Lipow Oil Associates in Houston. The ripple effect would be felt beyond the US as “the Russian invasion of Ukraine has forced people to look for alternative supplies of products and oil.”

But it appears that the U.S. Gulf Coast can breathe a sigh of relief, at least until next year. Though hurricanes Ian and Fiona hammered the Caribbean, the U.S. and eastern Canada, the western Gulf was unscathed. The Atlantic hurricane season, which ends Nov. 30, has only had 11 storms so far, below the 14 that emerge in an average year.

— With assistance from Devika Krishna Kumar and Chunzi Xu.

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