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When and how do tropical storms affect markets? The case of refined petroleum

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  • Fink, Jason D.
  • Fink, Kristin E.
  • Russell, Allison

Abstract

Little is known about the magnitude of the effect of powerful tropical storms on asset prices, or when markets revise price expectations in response to such storms. Refinery clustering in the coastal northwest Gulf of Mexico provides an opportunity to examine such effects directly. We examine the effect of tropical storm forecasts on the crack spread -- the difference between refined petroleum and crude oil prices. Prices appear to reflect storm effects at the 24-h forecast horizon. Further, the magnitude is significant -- category 4 hurricanes in this region increase refined petroleum prices relative to crude oil by about 13.5%.

Suggested Citation

  • Fink, Jason D. & Fink, Kristin E. & Russell, Allison, 2010. "When and how do tropical storms affect markets? The case of refined petroleum," Energy Economics, Elsevier, vol. 32(6), pages 1283-1290, November.
    • Handle: RePEc:eee:eneeco:v:32:y:2010:i:6:p:1283-1290
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    4. Tapia, Pablo & Pastén, Boris & Sepulveda Velasquez, Jorge, 2022. "Earthquakes in Chile-Peru and the price of copper," MPRA Paper 113078, University Library of Munich, Germany.
    5. Ederington, Louis H. & Fernando, Chitru S. & Hoelscher, Seth A. & Lee, Thomas K. & Linn, Scott C., 2019. "Characteristics of petroleum product prices: A survey," Journal of Commodity Markets, Elsevier, vol. 14(C), pages 1-15.
    6. Liu, Haiyan & Ferreira, Susana & Karali, Berna, 2015. "Hurricanes as News? A Comparison of the Impact of Hurricanes on Stock Returns of Energy Companies," 2015 Annual Meeting, January 31-February 3, 2015, Atlanta, Georgia 196845, Southern Agricultural Economics Association.
    7. Fink, Jason D. & Fink, Kristin E., 2013. "Hurricane forecast revisions and petroleum refiner equity returns," Energy Economics, Elsevier, vol. 38(C), pages 1-11.
    8. Lopatta, Kerstin & Kaspereit, Thomas, 2014. "The cross-section of returns, benchmark model parameters, and idiosyncratic volatility of nuclear energy firms after Fukushima Daiichi," Energy Economics, Elsevier, vol. 41(C), pages 125-136.
    9. Seyed Amir Hossein Sabet & Marie-Anne Cam & Richard Heaney, 2012. "Share market reaction to the BP oil spill and the US government moratorium on exploration," Australian Journal of Management, Australian School of Business, vol. 37(1), pages 61-76, April.

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