Natural Disasters and Energy Prices

Some of these are: current supply (or output from the sources of energy); the amount of energy stored in the reserves of the country; and the demand for oil, both in national and international markets.

Natural disasters can also cause the prices of energy to go up. In the second decade of the new millennium, there are two factors that have been determining the prices of energy: threats (if any) to the supply of energy, and the state of the local and global economies.

When natural disasters like storms, earthquakes or cyclones occur, the supply of oil is greatly affected. This is more so when disasters occur during areas that have major energy reserves or refineries. When production is shut in some of these centres, the supply of oil goes down. The supply goes down, but the market demand still remains high.

In the year 2005, several refineries and pipelines in the United States had to be closed down due to Hurricane Katrina, which lead to a decrease in the production of oil in the country. In some cases, the disaster affects the oil wells, or other sources of energy. The source is left intact, but the refineries or pipelines have to be shut down; having a source of oil cannot be of much help if there are no refineries to process them, or pipelines to convey them.

In 2011, the tsunami that hit Japan ended up causing damage to the Fukushima nuclear reactors, prompting them to be shut down immediately. The two reactors – which provided for most of Japan’s energy needs - has still not reopened even after year has passed after the disaster occurred.

Such natural disasters can affect the prices for a longer period of time too, depending on how long it takes to repair, rebuild or restart production at these affected locations. The prices may also vary depending on the availability of alternative sources of fuel, and whether they can be used on a wider scale. Is it time you should review you existing business energy provider.

Natural disasters also disrupt the economy and cause imbalances between supply and demand, driving the prices of energy up. Today, most countries depend on imports from others to meet their energy requirements, and a disaster in one part of the world can affect the global economy, particularly the energy market.

Many countries have now begun programmes to protect their energy resources and make them more resilient to natural disasters. This includes upgrading to infrastructure that can stand any disasters the region is prone to; monitoring the status of these resources and analysing them; and being prepared to face any emergencies with the least amount of loss.