With the final touches being implemented on BP's blown out well in the Gulf of Mexico, focus is shifting off the site and on to other issues- such as the next storm that may affect the oil industry.
While Tropical Storm Colin dissipated earlier this week, it has recharged and has again formed back into a tropical storm. There's also a moderate chance of more tropical development just west of African waters that I'll be keeping a close eye on.
While many don't understand how and why hurricanes have increasingly impacted oil and gasoline prices, I can offer a simple explanation. Remember Katrina? Remember 2005 and the onslaught of hurricanes? Disruptions more recent- including Hurricane Ike also had great impacts on gasoline, oil, and distribution. Supply becomes greatly impacted, and prices shoot up in just a moments notice.
Ike brought major shortages to many areas of the upper Southwest including Tennessee- I'm sure residents can remember. Large hurricanes or disturbances like these have seemingly become more likely the past few years, so until these events become distance memories, traders are likely to vividly remember these events and their impacts, and emotion could prevail during times of storms.
Motorists should be aware of this "new" impact on gasoline prices and realize that should a hurricane threaten vast areas of oil or gasoline production (the Gulf is home to a majority of oil production as well as a significant amount of refining capacity) prices will rise- almost like a knee jerk reaction. Many times prices quickly regain their footing- but be aware that prices will become increasingly volatile should hurricane season become busy- where more than a couple storms are active. I vividly remember camping in Yellowstone in 2008- when I was back in cell phone service, I quickly learned that there were three named storms heading for the U.S.- I had multiple media outlets calling and quickly knew that gasoline prices would spike.
Be prepared should that happen in the next month or two. Certainly no one wants to see such an event happen, but being prepared will be better than ignoring a potential situation.