Hurricane season in the United States can be a major driver of volatility in the energy sector, though investors tend to overlook nuances that can leave some companies heavily affected while others are barely scathed. When storms threaten the Gulf Coast, there is always a possibility of refinery closures, disruptions to production, infrastructure damage, and resulting increases in prices at the pump. Early October's Hurricane Isaias was a recent demonstration of how predicting the impacts of these events can be difficult.
While forecasts initially called for Isaias to impact a wide area of Gulf Coast refineries, as landfall approached the projected impacted refinery capacity shrank considerably. For investors, the disruption to energy companies in the area may ultimately have been less than expected, but the lessons on how to seek opportunities remain. The impact of a hurricane on any specific company tends to come down to where its assets are located, how diversified its revenue streams are, and whether it can capture the widening crack spread that often occurs after refining capacity is reduced.
