Over the weekend, Hurricane Harvey made landfall in Texas as one of the strongest hurricanes to hit the state in 50 years. The immediate impact was felt with strong winds and storm surge, but the major flooding caused by this slow moving system is expected to last into the week. Houston, the fourth most populous city in the nation and major energy hub could see totals of 50+ inches of rain. Our thoughts and prayers are with those affected by this storm in Texas.
One of the concerns from this storm for investors is energy prices. While the storm’s impact on oil and gas production has been minimal, concerns exist regarding refining capacity. Because of this storm, many of the refineries in the area have had to preventively shut down or reduce production – causing gasoline prices to rise. It is estimated that around 15% of total U.S. refining output has been shut down because of this storm. The positive news so far is that no substantial long-term damage to these refineries has been reported.
How is Hurricane Harvey affecting other areas of the market? Similar to the energy sector, the results thus far have been mixed. Home improvement retailers are trading up as sales of emergency supplies (plywood, generators, etc…) should boost sales short-term. Longer term, these retailers should benefit from reconstruction activities. Insurance companies and reinsurance companies are trading down slightly on Monday morning.
Overall, our view is that this natural disaster will have a major impact on coastal Texas residents and economies; the impact on the global economy will be minimal. If you have any further questions that you would like to discuss, please don’t hesitate to give us a call.
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