Will the hurricane hurt or help oil stocks??

Question

Will the hurricane hurt or help oil stocks??

Answer 1

It sort of depends on how many Gulf oil platforms it knocks out and which oil company they belong to.  

Answer 2

That is the right question to focus on to learn investing.  Every major occurrence - political, financial, meteorogical, nautical has a POTENTIAL impact.  What the sharp investor has to decide, in times of something of this magnitude, is if the event will negatively, positively, or neutrally impact the value - in the investing public's perception - of a given company, industry sector, or general market.

If the hurricane were to steamroll (God forbid) the oil derricks in the Gulf of Mexico, then the impact would be UP on price (all else equal) because it takes supplies out of action temporarily due to the damaged drilling, storage and/or delivery systems. This increases demand because the same number of end-users are competing for a smaller volume of available oil.  

If it missed entirely, the net impact on the oil sector might be zero, but it might damage other industry, raising or lowering demand/supply for a specific company's, or sector's products, and potentially impacting the market overall.

In reality, the price of oil dropped dramatically today, which could indicate one or all of the following:

1.  The potential risk/impact of the storm is already "priced in".

2.  The plot of the storm's path is regarded as less threatening today, based on expert consultants' interpretations/projections.

3.  The government's announcement - today - that it is ready to open the strategic petroleum reserves if needed due to a hurricane interrupting the oil supply - which has the effect of adding supply, reducing potential demand, and thereby holding/reducing the price of oil.  

Hope this is of help to you.