Texas and Louisiana are the crux of US oil and gas production but face severe, growing risks from hurricanes. With world liquefied natural gas (LNG) and crude products markets facing persistent, systemic risks from severe hurricanes in the US Gulf Coast, policymakers and industry actors need to expand contingency planning for major disruptions and take additional preparations.
The Atlantic hurricane season runs from June through November. The storms can begin as far away as the waters off the coast of Africa, gain power as they cross the ocean, and curl their way up through the Gulf of Mexico to make landfall in the United States. For example, eastern Texas and southern Louisiana have suffered from severe hurricanes and other weather events in recent years. In 2005, Hurricane Katrina flooded New Orleans, leading to more than 1,300 fatalities and vast economic disruptions. In 2017, Hurricane Harvey devastated entire sections of Houston. In early July of this year, Houston was hit by Hurricane Beryl, a Category 1 storm when it made landfall. Even though Category 1 is the least intense on the five-point scale, Beryl left nearly one million customers of CenterPoint Energy, a local utility, without electricity more than a week after the hurricane made landfall. This year, the Atlantic hurricane season is expected to be more active than normal, due to record-high sea surface temperatures and the shift from El Niño to La Niña.
This latest hurricane season is part of a trend: Gulf Coast hurricanes are increasingly worrisome. There is a strong correlation between Atlantic sea surface temperatures and the power dissipation index, an aggregate measure of Atlantic hurricane activity, accounting for frequency, intensity, and duration. Both have sharply risen since the 1970s. So, as climate change driven by greenhouse gas emissions continues to warm ocean surfaces, hurricanes will likely become more intense, with greater wind speeds and rainfall.
While hurricanes pose significant humanitarian risks along the Gulf Coast, they also disrupt world energy markets. The Gulf Coast is one of the world’s most important export markets for oil, LNG, and liquefied petroleum gas (LPG), which is typically used for petrochemical feedstock. It is also a top export site for refined products—sometimes called clean products—such as gasoline, diesel, and jet fuel…
The time to deepen preparation is now
US natural gas and oil exports are growing, and much of the supporting infrastructure is located along the Gulf Coast. Unfortunately, these facilities are potentially vulnerable to hurricanes, and outages could have significant and persistent effects on US and world energy markets. Policymakers and industry actors, both in the United States and abroad, should carefully consider potential impacts from increasingly dangerous hurricanes and conduct further contingency planning. Concentrating energy infrastructure maximizes benefits from agglomeration and economies of scale while minimizing the tyranny of distance. Yet concentration poses significant risks that could prove disastrous in the future. With hurricanes only growing worse, the US Gulf Coast oil and gas complex must recognize and adapt to changing realities.
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