Hurricane Isaias shut down oil production in the Gulf of Mexico. Refineries prepared for potential damage. This happened in 2020, which you might recognize as four years before the wars mentioned in the summary that supposedly tightened fuel markets. Time travel is now a fundamental input in supply-demand models.
The headline warns of market disruptions. Fuel could get tight. Except the hurricane hit during a pandemic when nobody drove anywhere and oil went negative because storage tanks were full. Gasoline demand had collapsed. Refineries were already cutting runs. But sure, let's worry about supply shocks when the real problem was finding someone willing to take free petroleum.
Retail traders saw this headline and bought USO calls. They do not know what USO is. They do not know it's a fund that bleeds value through contango like a hemophiliac at a razor convention. They just know oil goes up when supply goes down, because they learned economics from a motivational poster. The hurricane lasted three days. Their calls expired worthless in two.
Energy analysts issued reports about tightening markets. They used phrases like supply constraint and logistical bottleneck. What they meant was it rained hard and some guys evacuated a platform. The platform came back online. The rain stopped. The market moved on to the next thing it would misinterpret.
Isaias caused an estimated $4.8 billion in total damages across multiple states. Zero of that mattered to oil prices by the following week. But someone definitely sold a newsletter subscription explaining why this hurricane was different, why it confirmed their thesis, why now was the time to rotate into energy.
The thesis drowned faster than the Gulf Coast production facilities, which by the way, were literally built to withstand hurricanes.
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