Activity In Tropics Emerges As Next Big Hurricane Could Send Gas Prices To “Apocalyptic” Levels

Three tropical disturbances are being closely monitored for development in the Atlantic as fears mount that above-average storms could wreak havoc on oil/gas operations in the Gulf of Mexico and send gas prices at the pump to “apocalyptic” heights. 

“The lull in the tropics has come to an end as we’re now watching three different areas for development from the Gulf of Mexico to the central Atlantic,” The Weather Channel reports. 

The first system is an area of low pressure in the northern Gulf of Mexico and is expected to track westward early this week and could dump heavy rains along with parts of the Texas coast. Even though the storm has low probabilities of formation over the next 2-5 days, the system is situated near the Gulf Coast (PADD 3), which has the highest concentration of US refineries. 

The second is a disturbance located 900 miles east-southeast of the southern Windward Islands and has a 70% chance of cyclone formation in 2 days with probabilities at 90% for five days. Called Invest 94L, the storm is expected the strengthen as it enters the Caribbean Sea this week. Behind Invest 94L is a tropical wave with a 20% probability of developing into a storm over the next five days. 

The elevated tropical activity comes as OPIS energy analysis global head Tom Kloza told Fox Bussiness,” if we have an active tropical season” that impacts domestic refining efforts in the Gulf of Mexico, then it could send gas prices to “apocalyptic” heights. 

“I think for gasoline, we go back above $5 and apocalyptic numbers come into play with hurricanes. 

“The thing that people have to watch and is really insidious for inflation are the values for diesel and jet fuel. Stocks of those fuels are not building, they’re tight internationally and that’s where we’re going to have to pay the piper in the last 100 days of the year,” Kloza said. 

Tropical activity in the Gulf can shutter offshore drilling rigs and onshore refining operations. And given today’s extremely tight refining capacity and a bulk of the nation’s refineries are situated on the Gulf Coast, we “have to cross our fingers that no refining infrastructure gets damaged by hurricanes or by the electric grid,” Kloza said. 

Ahead of the hurricane season, which began on the first of June, Bloomberg Markets’s Jake Lloyd-Smith warned about the consequences of an active hurricane season and how it could severely disrupt refinery operations. 

Everyone, including the Biden administration, has figured out that the bottleneck in refining is the culprit behind soaring diesel and gasoline prices. The US is structurally short and down 1 million barrels from April 2020 to 17.95 million bpd as of June. 

All it would take is one (or multiple) major hurricanes with direct landfall on the Gulf Coast (or PADD 3) to send fuel prices at the pump even higher. 

Read further at ZeroHedge

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