Atlantic Storm Means a ‘Chess Game’ With Nature for Businesses

  • Potential Hermine could threaten Gulf of Mexico, Florida
  • Storm has 80 percent chance of forming, Hurricane Center says

A cluster of Atlantic thunderstorms has U.S. businesses and markets guessing what nature will deliver as weather models fail to agree on whether a tropical storm will hug Florida or enter the energy-rich Gulf of Mexico.

Computer models are showing several possible paths for the system, which doesn’t have a well-defined center. There’s an 80 percent chance Tropical Storm Hermine will form near Florida in the next five days, according to the U.S. National Hurricane Center in Miami.

As the Atlantic system approaches the U.S., governments and insurers will be mapping out potential property damage, while energy traders will assess the threat to Gulf rigs, platforms and refineries. For retailers like Lowe’s Cos., the storm’s strength and track will determine how and when it shifts inventory from warehouses to stores.

“As storms are approaching, it is kind of like a chess game,” said Rick Neudorff, emergency command center operations manager for Lowe’s in Wilkesboro, North Carolina. “We’re continually monitoring our multiple weather sources.”

Longer Lines

Florida’s population has jumped since Wilma, the last hurricane to hit the state, struck in 2005. That could mean even longer lines at grocery stores and banks if a major storm approaches, Neudorff said.

“The challenge for a major Florida event is going to be the large population increase,” he said. “So theoretically you could have half a million people getting hurricane stuff for the first time ever.”

Dry air and adverse wind conditions have so far prevented the system, referred to as Invest 99L by meteorologists, from become more organized, said Jeff Masters, co-founder of Weather Underground in Ann Arbor, Michigan. Still, a tropical storm could develop by Friday, he said.

“A high-stakes game of wait-and-see is underway with 99L,” Masters said. “However, recent satellite images suggest the wait-and-see game may be ending.”

Florida’s Division of Emergency Management is watching the potential storm’s progress and New Orleans has also warned residents to be ready, even though the system is still far off.

Potential Damage

Once the storm is named, Verisk Insurance Solutions will begin to plot out potential damage and power outages along its projected path, said William Ramstrom, the Lexington, Massachusetts-based director of the company’s Respond forecasting product and weather applications.

It’s not yet clear whether a tropical storm will enter the Gulf of Mexico, home to about 17 percent of U.S. crude oil production and 5 percent of natural gas output. More than 45 percent of petroleum refining capacity and 51 percent of gas processing is along that coastline.

Any impact on the gas market may be more muted than in past years since the boom in production from shale formations has shifted more output onshore, said Stephen Schork, president of the Schork Group Inc., a consulting company in Villanova, Pennsylvania.

“If this was ten years ago, natural gas prices would be a dollar higher,” he said. Schork said he would be more concerned if a hurricane manages to get into the Gulf and threaten refineries there.

So far in 2016, seven storms have formed across the Atlantic, including Alex, which was the first January hurricane to develop in the basin since 1938. The storm season runs from June 1 to Nov. 30, but the heart of it is from mid-August to October.

“This is Florida, so this may not be the only event” this season, Neudorff said. “We’re just getting into the busiest season and there’s several active waves just off the coast of Africa.”

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