If you’ve yet to check this week’s weather, we’re already headed into what some call the “preheating” stage of Texas summer. A potentially historic heatwave is forecast in parts of the state this week, with South Texas likely to see record-breaking early season temperatures.
Also heating up right now are those Atlantic Ocean waters. Hurricane season is just around the corner, officially beginning on June 1. Meteorologists are expecting an above-average season, but potentially less busy than last year.
Storms that enter the Gulf can potentially disrupt Texas’ energy industry, whether storms hit drilling platforms or refining hubs onshore.
Matt Smith, energy analyst for Kpler, joined Texas Standard for a look ahead at what the industry will be watching for this hurricane season. Listen to the interview above or read the transcript below.
This transcript has been edited lightly for clarity:
Texas Standard: So how is this Atlantic hurricane season shaping up? It starts on June 1, correct?
Matt Smith: Yeah, that’s right. And gosh, yeah, forecasters are seeing it above average.
And it feels like we’ve talked about this in recent years – it feels every year we bet above average, but at least this current one is expected or it’s being described as “dynamic” as opposed to last year’s being described as “hyperactive.”
So it’s not quite as bad. It’s not as expected to be.
I don’t know how to read these tea leaves with “dynamic” vs. “hyperactive.” What does that mean to you?
Numbers. We’re looking at 17 named storms, which compares to the average of 14. 9 hurricanes expected, compared to the average of 7 and 4 major ones compared to an average of 3.
So we’ll have to see. I’ve got some names for you though.
Okay, hit me up with those.
Okay, so the best ones for this coming season: I’m liking Humberto, Nestor and Olga. They are all in the mix.
And another interesting fact, or two interesting facts here, is that Van and Wendy are two names on this year’s list that haven’t previously been used for an Atlantic storm. All the rest have.
But the one that stands out in my mind was Harvey. And it’s been, well, Harvey was back in 2017. In fact, it’s my understanding that we’re overdue for another one of these massive catastrophic storms to hit the Gulf Coast. I don’t wanna say it, but that’s what the experts are saying.
They’re saying we really do need to batten down the hatches right now. How is the gas and oil industry looking at the possibilities for a catastrophic storm to hit Texas?
Gosh, well, you know, there’s always the risk of it. But the thing is, I guess it also depends very much on where it hits or where it heads to.
So for example, if we see it heading more to kind of the western parts of the Gulf of Mexico there, so like Corpus Christi or Houston, that actually turns out to be bearish for oil prices – as in pushes oil prices lower – but is bullish for gasoline prices for increasing them. And the reason for that is because of all the refineries around the Corpus Christi and Houston, Texas area there.
If a storm heads that way, then that’s who has to batten down the hatches basically.
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Oh, interesting. Alright, so different impacts on oil versus gas. What about natural gas? Could we see that affected by hurricanes?
Yeah, absolutely. So what is interesting though, is that in terms of production, only 2% of natural gas in the U.S. is produced in the Gulf of Mexico now, when it was 20% like two decades ago. So a very small piece of the pie now.
That said, the U.S. is exporting so much more LNG. And so there’s eight load points in the U.S., and we’re seeing exports of about 15 billion cubic feet (BCF) a day. So to put that in context, even just in 2020, we’re only exporting about 6 [billion cubic feet]. So we continue to add these new export points. We continue to push out more.
And so if we did see a storm hit the Gulf of Mexico and hit one of these load points, which has happened in recent years, then that will knock out those exports. And if that happened, actually, that would be bearish for natural gas because it would mean more U.S. natural gas not being able to leave the country, to more supply.
So lots of different dynamics at play here.
Speaking of dynamics at play, I think a lot of folks listening to us have noticed some dynamics at the gas pump. I noticed that my local station went from selling for around $2.50 a gallon to around $2.70. We’re talking regular here.
When I told you that, you said, “well, it should be going the other direction.” What’s up with the gas prices right now?
Yeah, that’s it. So in the grand scheme of things, gas prices are in great shape. In terms of just for Texas, they’re 50 cents lower year on year. So that’s a big difference, right?
But even though we’ve seen them gradually dropping over the last month here, we’ve got oil prices rallying in recent days. And so sometimes you see the gas stations trying to get ahead of these pops, right? And so that’s why you may be seeing a bit of an increase at the pump, even though the average is telling us it shouldn’t be that high.
