Publication date:
October 10, 2024
Increasing Frequency and Severity of Hurricanes Impact Energy Sector and Economic Growth
Climate change is intensifying hurricanes, leading to more frequent and powerful storms that are causing significant economic damage and disrupting energy infrastructure.
Climate & Energy
The recent impacts of Hurricane Milton in Florida and Hurricane Helene across several states underscore a growing trend of more frequent, powerful, and costly hurricanes. This trend is having significant implications for the energy sector and broader economic growth.
According to Adam Smith, a climate scientist at the National Oceanic and Atmospheric Administration (NOAA), hurricanes are the most expensive weather and climate events affecting the United States. NOAA data shows that between 1980 and August 2023, the U.S. experienced 363 billion-dollar weather disasters, with hurricanes accounting for $1.3 trillion, or about half of the total $2.6 trillion cost.
The frequency of hurricanes striking the U.S. mainland has increased notably, from 12 per decade in the 1960s and 1970s to 19 in the 2010s. Climate change is exacerbating this trend, with warmer ocean temperatures fueling stronger storms and warmer air carrying more rain. Michael Mann, a climate expert at the University of Pennsylvania, notes that the most severe storms have become about 10% more intense in terms of maximum sustained winds, translating to a roughly 33% increase in destructive potential.
For the energy sector, these intensifying storms pose significant risks. Hurricanes can disrupt energy infrastructure, including offshore rigs and refineries, leading to spikes in national gas prices. The potential for more frequent and severe disruptions to energy production and distribution networks is a growing concern for industry operators and investors.
The economic impacts of these storms are substantial. Analysts at Oxford Economics estimated that Hurricane Milton, which was in the path of about 2.8% of U.S. GDP, could lower fourth-quarter annualized GDP growth by 0.14 percentage points. The tourism, trade, and transportation sectors are particularly vulnerable to hurricane impacts.
Employment figures are also affected, with Hurricane Helene potentially reducing nonfarm payrolls for October by 40,000 to 50,000 jobs. The combined effects of recent hurricanes and other factors could see monthly job growth drop below 100,000, compared to a previous trend of 167,000.
While rebuilding efforts following hurricanes can provide a short-term economic boost, supporting jobs and generating economic activity, the long-term sustainability of this pattern is questionable. A 2022 paper from the Potsdam Institute for Climate Impact Research suggests that increasing hurricane damages may eventually exceed the coping capacities of the U.S. economy.
For energy traders and analysts, these trends highlight the need to factor in growing climate risks when assessing energy infrastructure investments, supply chain resilience, and potential market disruptions. The increasing frequency and severity of hurricanes pose challenges not only to coastal energy facilities but also to the broader energy market dynamics and economic stability in affected regions.
According to Adam Smith, a climate scientist at the National Oceanic and Atmospheric Administration (NOAA), hurricanes are the most expensive weather and climate events affecting the United States. NOAA data shows that between 1980 and August 2023, the U.S. experienced 363 billion-dollar weather disasters, with hurricanes accounting for $1.3 trillion, or about half of the total $2.6 trillion cost.
The frequency of hurricanes striking the U.S. mainland has increased notably, from 12 per decade in the 1960s and 1970s to 19 in the 2010s. Climate change is exacerbating this trend, with warmer ocean temperatures fueling stronger storms and warmer air carrying more rain. Michael Mann, a climate expert at the University of Pennsylvania, notes that the most severe storms have become about 10% more intense in terms of maximum sustained winds, translating to a roughly 33% increase in destructive potential.
For the energy sector, these intensifying storms pose significant risks. Hurricanes can disrupt energy infrastructure, including offshore rigs and refineries, leading to spikes in national gas prices. The potential for more frequent and severe disruptions to energy production and distribution networks is a growing concern for industry operators and investors.
The economic impacts of these storms are substantial. Analysts at Oxford Economics estimated that Hurricane Milton, which was in the path of about 2.8% of U.S. GDP, could lower fourth-quarter annualized GDP growth by 0.14 percentage points. The tourism, trade, and transportation sectors are particularly vulnerable to hurricane impacts.
Employment figures are also affected, with Hurricane Helene potentially reducing nonfarm payrolls for October by 40,000 to 50,000 jobs. The combined effects of recent hurricanes and other factors could see monthly job growth drop below 100,000, compared to a previous trend of 167,000.
While rebuilding efforts following hurricanes can provide a short-term economic boost, supporting jobs and generating economic activity, the long-term sustainability of this pattern is questionable. A 2022 paper from the Potsdam Institute for Climate Impact Research suggests that increasing hurricane damages may eventually exceed the coping capacities of the U.S. economy.
For energy traders and analysts, these trends highlight the need to factor in growing climate risks when assessing energy infrastructure investments, supply chain resilience, and potential market disruptions. The increasing frequency and severity of hurricanes pose challenges not only to coastal energy facilities but also to the broader energy market dynamics and economic stability in affected regions.
