Summer travel season is upon us – and unfortunately for vacationers, that also coincides with hurricane season.
The National Oceanic and Atmospheric Administration’s (NOAA) National Hurricane Center currently has Hurricane Beryl, the first of the season, classified as a category 4 storm with potentially life threatening winds. It’s making its way toward the Gulf of Mexico and is projected to hit the Yucatán Peninsula on Friday.
The hurricane could have varying effects on the energy industry, depending on what path it ultimately takes, according to Matt Smith, energy analyst for Kpler. He spoke with the Standard about the different potential scenarios – plus the holiday travel outlook and how it could influence gas prices. Listen to the interview above or read the transcript below.
This transcript has been edited lightly for clarity:
Texas Standard: So we have Beryl barreling toward the Caribbean. Can you remind us how these hurricanes on different paths in the Gulf of Mexico can have different impacts on the energy industry?
Matt Smith: Yeah, absolutely. So if the storm is heading more to the eastern part of the Gulf, then it’s more bullish for oil prices because it’s likely to knock out offshore production.
If it’s heading more to the western part of the Gulf, so making landfall along the Texas to Louisiana shoreline, then that’s bearish for oil but bullish for refined products because refineries could get damaged or at least taken off line. So oil isn’t consumed while products are not produced.
And it sounds so precise to doesn’t it? Unfortunately, we don’t know exactly which way this storm is actually heading.
We should talk about hurricane season. What are the expectations? I’ve been hearing a lot about this possibly being one of the most active hurricane seasons on record – at least, that’s what people are prepping for right now.
Exactly. So it’s being called “hyperactive,” and so NOAA is calling for as many as 25 named storms. The typical average is only 14. You know, 8 to 13 hurricanes when the average is seven. And we’ve already got our first hurricane coming through here.
So, you know, hurricane season starts beginning of June. We’ve already had Tropical Storm Alberto, Hurricane Beryl right now. And there’s also another tropical storm that’s just made landfall, Chris, in Mexico as well.
So, you know, it’s really concerning here because you really don’t get the ramp up in activity typically until the end of August and to peak in September.
Yeah, all of this obviously happening during a big week for holiday travel.
Yeah, so AAA is projecting a record 60.6 million people will travel by car. So that’s up to nearly 3 million versus last year, and also up versus 2019.
Does that mean fewer people traveling by air or how does that shake out?
No. So actually the number of domestic air travelers is also expected to set a record, getting to 5.74 million people flying over this weekend. And so, yeah, everyone’s hitting the roads, hitting the air, to kind of celebrate this weekend, it seems.
Well, then let’s connect the dots here. We have hurricanes in the Caribbean, we have holiday travel happening. What about prices? Where do we stand with energy prices right now?
So oil prices have been pushing higher. On a U.S. basis, we’re close to $80 a barrel there. And so that translates to gas prices at the pump.
The national average is about $3.50 gallon. In Texas, it’s $3.10, which is slightly less than a year ago. So although oil prices are relatively high here, gas prices are at least remaining in check for now.
I know that when you talk about aviation fuel and that sort of thing, things can get kind of wonky on the price side. But are we getting any any help with aviation fuel prices this year? Is it making it cheaper to travel by air right now?
It’s supposed to be slightly lower to buy an air ticket now versus what it has been. But really the price of oil dictates everything. So that’s driving the price of diesel, for gasoline, and for jet fuel – although there is a nuance between those 2 or 3.