The United States is bracing for a potentially volatile summer fuel market, as a combination of record-breaking heat and an active hurricane season threatens to test the resilience of the country’s oil refiners. Analysts warn that this double whammy could lead to extremely volatile fuel prices in the middle of the peak travel season.
The Atlantic hurricane season, which runs from June through November, poses an annual threat to U.S. refineries, with half of the country’s over 18-million-barrel-per-day refining capacity located along the vulnerable Gulf Coast. This year, government forecasters expect up to seven major hurricanes, double the annual average of three.
The intensity and early arrival of Tropical Storm Beryl, which at one point became the earliest Category 5 hurricane on record, signals an active and disruptive season ahead, according to Neil Crosby, crude market analyst at Sparta Commodities.
Hurricanes can significantly disrupt fuel supply, with the potential to remove as much as a million barrels a day of fuel production and lead to extended outages or even permanent refinery closures. This can cause gasoline prices to jump by 25 cents to 30 cents per gallon, according to the U.S. Energy Information Administration.
The threat of hurricanes is compounded by the record-breaking heat that has been scorching the United States. This extreme weather can also strain refining operations, potentially leading to additional supply disruptions and price volatility.
Analysts warn that the combination of these factors could create a “double whammy” that will test the resilience of U.S. refiners and roil fuel prices during the peak summer travel season, when demand is typically highest.