Sep 18, 2017
The Impact of Severe Weather on the Nation’s Energy and Automotive Aftermarket Industries
Being a resident of Katy, Texas (a suburb about 20 miles west of downtown Houston), I found myself right in the middle of Hurricane Harvey as it made landfall on the Texas Gulf Coast at the end of August. While my home was spared from flooding, many of my close friends, neighbors, and colleagues were not so lucky. Now that the storm has passed, it has been inspiring to watch so many people volunteering to help others in need. I am confident that the same spirit of helping others is taking place in southern Florida, where Hurricane Irma recently hit.
We know that major weather events have a direct impact on the performance of the automotive aftermarket. Looking back over the last several years, extreme hot and cold months have changed the trajectory of the industry’s performance. November 2014, and December 2016 are two months that come to mind. December 2016 sales grew over 9 percent versus the prior year, due to December 2015 being abnormally warm. Weather related categories – refrigerants due to heat; batteries and wipers due to cold and snow – perform well during these periods.
In a span of 12 years, the U.S. has been faced with the costliest natural disasters on record thus far, namely Hurricane Katrina and Hurricane Sandy. Fast forward to August of this year when Harvey slammed the Gulf Coast, creating a situation unique in its own way as it struck one of the nation’s most important energy hubs. Throughout the area, multiple refineries were forced to halt production because of the storm. The resulting impact on national gasoline prices has been dramatic over the last three weeks. In the week ending September 11, 2017, the average national price was $2.80 a gallon, up from $2.50 a gallon the month prior. This $0.30 increase is significant as gasoline prices haven’t been this high in over two years. Gasoline demand in the most recent week is down 4.5 percent from the same week the year prior.
For the aftermarket, we know that gasoline prices, miles driven, and industry performance are all highly correlated. What happens to gasoline prices in the coming weeks and months will be important for our industry to closely watch. Might they come back down to pre-Harvey levels once production normalizes? Or is $2.80 a gallon our new national normal? Only time will tell.