Texas and Louisiana are core regions of U.S. oil and gas production, but are increasingly at risk from hurricanes. As global liquefied natural gas (LNG) and crude oil products markets face ongoing systemic risks from major hurricanes along the U.S. Gulf Coast, policymakers and industry stakeholders must expand their contingency plans for major disruptions and make additional preparations.

The Atlantic hurricane season runs from June to November. Storms can begin as early as the waters off the coast of Africa, gain strength as they cross the ocean, and make their way through the Gulf of Mexico to make landfall in the United States. For example, east Texas and southern Louisiana have been affected by major hurricanes and other weather events in recent years. In 2005, Hurricane Katrina flooded New Orleans, killing over 1,300 people and causing tremendous economic disruption. In 2017, Hurricane Harvey devastated parts of Houston. In early July of this year, Houston was hit by Hurricane Beryl, which was a Category 1 storm when it made landfall. Although Category 1 is the least intense storm on the five-level scale, Beryl left nearly a million customers of local utility CenterPoint Energy without power more than a week after it made landfall. This year, the Atlantic hurricane season is expected to be more active than normal due to record high sea surface temperatures and the transition from El Niño to La Niña.

The recent hurricane season is part of a trend: Gulf Coast hurricanes are becoming increasingly concerning. There is a strong correlation between Atlantic surface temperatures and the power dissipation index, an overall measure of Atlantic hurricane activity that takes into account frequency, intensity and duration. Both have increased sharply since the 1970s. As climate change caused by greenhouse gas emissions continues to warm ocean surfaces, hurricanes are likely to become more intense, with higher wind speeds and rainfall amounts.

In addition to posing significant humanitarian risks to the Gulf Coast, hurricanes also disrupt global energy markets. The Gulf Coast is one of the world’s most important export markets for oil, LNG and liquefied petroleum gas (LPG), commonly used as a petrochemical feedstock. It is also a major export location for refined products – sometimes referred to as clean products – such as gasoline, diesel and jet fuel.

Liquefied petroleum gas

The U.S. Gulf Coast is a major LPG exporter, sending huge amounts of propane and butane abroad. LPG is used as a feedstock for the petrochemical industry, as a heating fuel, and as a motor fuel. In 2023, the United States shipped 1.6 million barrels of propane per day (MMBPD) abroad, with Japan, mainland China, Mexico, and South Korea as the largest export destinations. Total U.S. butane exports were about 0.46 MMBPD. U.S. Gulf Coast LPG export infrastructure is primarily located in the Houston Ship Channel, where the Gulf Coast’s two largest LPG export terminals are located, although the nearby cities of Freeport and Nederland also host facilities. The Mont Belvieu natural gas liquefied natural gas complex is also less than 30 miles from the Houston Ship Channel.

In the event of a major disruption to US LPG exports, importers across Asia would rush to find alternative sources of supply.

Liquefied petroleum gas

Because of their concentration in East Texas and West Louisiana, U.S. LNG facilities already face significant hurricane risk. And as regional export capacity grows and hurricane intensity increases, global LNG markets could face even greater disruption.

In recent years, major hurricanes have passed through this corridor, causing major export disruptions. Sabine Pass LNG was able to shake off the impact of Category 4 Hurricane Laura in 2020 after about a week. Cameron LNG, less than 80 miles away but directly in the eye of the hurricane, was shut down for over a month. There is an uneasy trade-off between electrifying LNG terminal operations and increasing their resilience. On the one hand, electrifying export terminals reduces their operational footprint in carbon dioxide equivalents. On the other hand, facilities that get power from underground gas pipelines are less vulnerable to hurricane-related disruptions than terminals that get their power from above-ground lines.

Future hurricanes could have even more devastating consequences. Sabine Pass LNG, Golden Pass LNG and Port Arthur LNG are all located on Sabine Lake on the Texas-Louisiana border, no more than eight miles apart.

These three terminals will have a peak throughput capacity of 66 million tonnes per annum (MTPA) once Golden Pass and Port Arthur are completed. For comparison, total US LNG exports in December 2023 were 13.6 billion cubic feet per day, or around 103 MTPA. If exports from these three facilities are disrupted by hurricanes, it will cause a price shock to global natural gas markets.

The U.S. Gulf Coast is rapidly dominating global LNG flows and will account for 19 percent of the total (79 million tons) in 2023, according to data from commodities company Kpler. Notably, Sabine Pass LNG is already the largest LNG export facility in the United States, shipping 29.5 million tons last year. A hurricane passing through the area could significantly delay construction at Golden Pass LNG and Port Arthur LNG, and any hurricane-related outage on the U.S. Gulf Coast this summer will have a significant impact on global markets. Europe and Asia, the two largest recipients of U.S. LNG exports, would be disproportionately affected.

Crude oil

The U.S. Gulf Coast has also become a major source of oil exports, accounting for just under 10 percent of total global seaborne departures in 2023, according to Kpler. More than half of all U.S. crude exports (2.2 MMBPD) flowed through the Corpus Christi, Texas export hub by volume in 2023. Houston was a major second loading point (1.1 MMBPD), followed by smaller volumes from Beaumont/Port Arthur (0.28 MMBPD) and other ports such as Louisiana’s LOOP (0.26 MMBPD) that shipped smaller volumes. While exports are concentrated in Corpus Christi, pipelines can ensure that these volumes are routed to other hubs – albeit only to a certain extent.

Refinery capacity and oil products

The Houston and Beaumont/Port Arthur regions are the largest refining markets in the country, with throughput capacities of approximately 2.5 MMBPD and 1.8 MMBPD, respectively.

Disruptions in the refinery market would impact domestic and international markets for raw products such as gasoline, diesel and jet fuel. For example, after Hurricane Harvey hit Houston and Port Arthur in September 2017, U.S. retail gasoline prices rose 13 percent in a matter of weeks. The price increase was particularly noticeable because gasoline prices typically drop in the fall, after rush hour.

The U.S. Gulf Coast is also a major source of refined products, particularly for Latin America. In 2023, Gulf Coast refineries exported 0.64 MMBPD of gasoline, 0.92 MMBPD of gasoil/diesel and 0.14 MMBPD of jet fuel/kerosene, with about 80 percent of that volume going to Latin America. However, U.S. diesel exports have become an increasingly important source of supply for Europe, rising to 0.17 MMBPD last year, up from just 0.07 MMBPD in 2022.

Now is the time to intensify preparation

U.S. exports of natural gas and oil are increasing, and much of the infrastructure that supports that infrastructure is located on the Gulf Coast. Unfortunately, these facilities are potentially vulnerable to hurricanes, and outages could have significant and lasting impacts on U.S. and global energy markets. Policymakers and industry players in the U.S. and abroad should carefully consider the potential impacts of increasingly dangerous hurricanes and develop further contingency plans. Concentrating energy infrastructure maximizes the benefits of agglomeration and economies of scale while minimizing the tyranny of distance. Yet concentration carries significant risks that could prove catastrophic in the future. As hurricanes become more severe, the U.S. Gulf Coast oil and gas complex must recognize and adapt to changing realities.

Joseph Webster is a senior fellow at The Atlantic Council Global energy center.

Reid I’Anson is a macroeconomist at the commodities company Kpler.

Anya Herzberg is an intern at the Global Energy Center.

This article reflects her own personal opinion.

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Joseph Webster

Image: Floodwaters caused by Tropical Storm Harvey surround Motiva Enterprises LLC in Port Arthur, Texas, U.S., August 31, 2017. REUTERS/Adrees Latif