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Posted at 10:30 AM ET, 06/ 3/2008

Gas Pains: A Perfect Storm?

By Steve Scolnik

Think gas prices are too high already? Friday morning CNBC reported on the likely impact of even the threat of a hurricane strike on energy prices (additional report, including a tour of Shell's real-time operations center here). After two seasons of few storm landfalls on the U.S. coast, traders have apparently not factored in the effect of possible disruption to oil supplies and refining operations from storm activity in the Gulf of Mexico.

Keep reading to learn how you can hedge against future storm impacts on energy prices. See Matt's full forecast for the outlook through the weekend.

For anyone wanting to reduce the financial risk, there are a few opportunities, but they are somewhat limited. The Hurricane Futures Market was developed in 2005 as a joint research project between the University of Miami and the Iowa Electronic Markets (IEM). The IEM specializes in presidential elections, but is also diversified into Federal Reserve policy and, of all things, Beowulf movie box office receipts; the 2008 hurricane market, if any, is not yet in operation.

The CME Group, formed from the merger of the Chicago Mercantile Exchange and the Chicago Board of Trade, offers three different types of hurricane contracts:

  • Hurricane Event contracts - Covering specific regional locations and actual named hurricanes making landfall in the United States Atlantic basin
  • Hurricane Seasonal contracts - Focusing on the total number of hurricanes that occur within a specific location or geographic area between June 1 and November 30
  • Hurricane Seasonal Maximum contracts - Focusing on the largest hurricane to make landfall within a specific location or geographic region between June 1 and November 30

By Steve Scolnik  | June 3, 2008; 10:30 AM ET
Categories:  News & Notes, Tropical Weather  
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Next: CommuteCast: Prepping for More Storminess

Comments

Who would buy what kind of policy, and where? Gulf Coast producers, refiners and distributors? Buyers worldwide? I don't suppose that CME makes any sort of stats available regarding what type of company purchases what kind of hurricane contract, and where.

Posted by: ~sg | June 3, 2008 7:08 PM | Report abuse

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