(click on image to enlarge)
BOTTOM LINE: It seems to be conventional wisdom by the many oil cheerleaders in the financial press that damaging hurricanes are bullish for oil prices. While the historic hurricanes in 2005 did cause an initial spike in prices as they made landfall, the ensuing plunge in US oil demand eventually led to a severe decline in energy prices. Hurricane Katrina made landfall on Aug. 29th and Rita on Sept. 24, 2005. As you can see from the above graph, the four-week moving average of US oil demand(the green line) plunged 19.4% from the week of Sept. 2nd through the week of October 21st. The price of a barrel of oil peaked on August 30, 2005 at $70.85 and collapsed 21.8% to $55.40 a barrel on November 18th, 2005. Moreover, the International Energy Agency has said it is ready to release strategic oil stocks if needed and European refineries are under-utilized, meaning that imports could easily rise to cover any lost petroleum product supply. Finally, I would argue that the global fundamentals for oil are much worse now than during 2005 even with prices substantially higher.
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