Towards the end of August, Hurricane Laura became a monster of a storm with its winds and storm surge or rising waters. The Hurricane fortunately for people and infrastructure came into the US where the least number possible were affected. If the Hurricane had been further east, the city of New Orleans would have been affected. If the Hurricane went further west Houston and Port Arthur would be affected. Houston has more national headquarters of oil and gas companies than any other city, while Port Arthur is the home of 40% plus of the refining capacity of the US. Those pipelines run to and from Port Arthur. If you add the other refineries along the Gulf Coast the volume of capacity increases to over 50%. The biggest refineries of about 2.2 million barrels per day shut down are operated by Valero, Total. Citgo and ExxonMobil.
In normal times, when a consumer watches the hurricanes affect Texas and Louisiana, they know that within a few days, the prices at the pump will jump. The good news for consumers even though 84% of the oil and gas produced in the region both onshore and offshore was shut down for safety concerns, the affect of the COVID and the hurricane on prices was minimal. Prices did not go up. The Gulf region normally produces 15% of the oil in the US and 61% of the natural gas.
There is a reason why oil and gas prices are down and energy companies are struggling, as we move into October hopefully there are signs where the normal commute can come back albeit with more fuel efficient vehicles.
Linking to dividend paying stocks, COVID dropped the demand in the oil and gas industry and it has been hard to adjust to it because for generations the oil and gas companies along with pipeline companies were some of the biggest most profitable and dependable dividend machines. Many dividend portfolios have an oil and gas company, but some companies are benefiting from COVID. If you still own the companies as an investment think long term.
There are more questions than answers, till the next time – to raising questions.