Experts at the National Oceanic and Atmospheric Administration (NOAA) are projecting a 75 percent chance that the Atlantic Hurricane season will be above normal in 2007. NOAA scientists have predicted 13 to 17 named storms, with seven to ten becoming hurricanes, of which three to five could become major hurricanes of Category 3 strength or higher.
Disruption to the region due to a severe storm or hurricane could negatively impact US gas prices, which are already near all-time high records.
Hurricane Season Begins
The Atlantic hurricane season officially begins June 1, 2007. Although this year is projected to be an above average year, statistics indicate each year is different due to varying ocean temperatures. Between 1965 and 2004 the US National Oceanic and Atmospheric Administration has recorded on average, 10.6 named storms and 5.9 hurricanes annually in the Atlantic basin.
NOAA scientists attribute the higher hurricane activity projections to warmer-than-normal sea surface temperature in the Atlantic Ocean and the El Nino/La Nina cycles. However, uncertainty surrounding the formation of La Nina and its possible strength should it develop has NOAA scientists tempering their projections slightly.
The changing trade-wind patterns due to dissipating El Nino and strengthening La Nina conditions will stimulate the formation of cyclones in the center of the storms. La Nina is characterized by unusually cold ocean temperatures in the eastern equatorial Pacific.
Hurricane Threats to US Petroleum Industry
Due to the higher than normal storm risk facing the Atlantic and Gulf coasts in 2007, the US petroleum industry is anticipating further disruptions to their Gulf oil and gas production facilities, potentially sending record high gas prices even higher.
Prior to the Memorial Day Weekend, AAA reported the average US retail price for unleaded regular gasoline hit an all-time high of $3.227 a gallon. According to the US Energy Department, current record prices are closing in on the inflation-adjusted peak of US $3.29 a gallon reached in March 1981.
Following the debilitating storms of 2005, Gulf petroleum industries have taken nearly two years to fully recover. Hurricanes Katrina and Rita destroyed 113 of the Gulf’s 4,000 oil and gas platforms and damaged 52 others. Katrina shut down an estimated 95 percent of crude production and 88 percent of natural gas output in the Gulf of Mexico.
Learning from previous disruptions, oil and gas companies operating in the Gulf have spent large sums of money to improve and strengthen their operations, specifically, increasing the strength of moorings that anchor oil rigs to the sea floor, digging deeper pipelines and providing backup power supplies to platforms and refineries.
Despite infrastructure overhauls, oil analysts are not convinced that production capabilities will remain fully intact following the season’s first major hurricane. Therefore we anticipate a rapid gas price increase, perhaps reaching US $4 a gallon when the first storm enters the Gulf of Mexico.
US Oil Stockpiles
Due to the above average forecasted hurricane season, NOAA scientists and oil analysts are urging US oil companies to stockpile supplies away from the Gulf Coast, fearing a major storm could disrupt supplies to the whole country.
However, due to lack of refinery investment in the US within the last 30 years, reserve capacity is severely limited outside the Strategic Petroleum Reserve, limiting stockpiling options.
