As Hurricane Sandy barrels toward the East Coast,industry specialists speculate how the east coast storm will effect energy markets:
Heating oil
The East Coast is the world’s biggest heating oil market. This is the time of year homeowners top up their storage tanks to make sure they’re ready for the cold weather. Much of the heating oil headed to markets north of New York is delivered by barges.
Those barges aren’t going to sea if there’s a hurricane lurking offshore. Loading and unloading operations are also typically suspended during storms for fear of dockside spills.
So Sandy could cause a major hitch in heating oil deliveries, causing supplies to back up at storage facilities because they can’t more to market. The net effect? A brief psychological bump-up in heating oil futures followed by a retreat after the storm, assuming there’s no major damage to regional refineries. Watch the action on the New York Mercantile Exchange’s futures contract.
Shock waves in the U.S. heating oil market can also be felt elsewhere, especially on the other side of the Atlantic. That’s because heating oil, with only minor refining tweaks, is also the main ingredient in diesel and jet fuel. So supply disruptions at New York Harbor, for example, can rattle Rotterdam, Amsterdam and Antwerp, the main fuel depots serving Northwest Europe.
GasolinePeople stocking up on emergency supplies or evacuating low-lying coastal areas usually do so by car. Expect a run on local gas stations ahead of the storm and subsequent pop in local retail gas prices. But the storm and its immediate aftermath are likely to have the exact opposite impact on the market. Flooding and downed trees hamper driving, easing gas demand. Again, prices jump ahead of the storm, fall back after.
RefineriesWhether there are extensive refinery outages in the region will determine how prices behave in the days and weeks after the storm. Most refineries facing severe weather take precautionary steps to minimize damage. That often involves shutting operations that might be flooded.
Most refineries in the Mid-Atlantic states are fed by big oceangoing tankers, so they are right on the water. Expect any of them in the storm’s path to curtail operations. When they do, give them several days to bring operations back up to pre-storm levels.
Refineries are easy to shut down. Restarting them typically takes days as to reheat and re-pressurize units.
Nuclear power plantsLike refineries, nuclear power plants take at least 24 to 48 hours to restart.
