Wall Street Embraces Weather Risk in New Era of Storms, Drought
Every uptick in wind speed along the Gulf of Mexico shoreline is of enormous interest to Mike Eilts.
Eilts, senior vice president for weather at DTN, a Minnesota-based analytics firm, knows that an unexpected cold front in Louisiana, nudged southward by a jet stream unsettled by global warming, can push rising winds into the Gulf, putting dozens of floating oil rigs at risk.
The rigs can withstand hurricane-force winds of 80 miles per hour if they have time to turn to face the tempest. But if they’re hit from the side, their pipes can be severed with just a bit more than a 35-mile per hour breeze. DTN is paid to make sure that doesn’t happen.
“If they get blow-off, it’s a huge problem that can cost them about $15 million each per event,” Eilts said in a telephone interview. “We run special models to watch those fronts, and we call out the captains of each ship within three hours of a cold front coming.”
From IBM and AccuWeather Inc. to outfits like Riskpulse, Jupiter and DTN, companies that track weather have created an intensely competitive new industry in just the last five years. Their client lists have grown to include insurers, banks and commodity traders, engineers and architects, shippers, retailers and the travel industry. And little is done without their input.
As global warming makes extreme weather more common, meteorologists have become the high priests of finance, mitigating uncertainty and boosting risk-related profits. “There’s kind of a wave building,” said Tory Grieves, membership manager at The Collider, a North Carolina nonprofit that helps climate entrepreneurs train and network.
Will the Polar Vortex leave a beer or mayonnaise-filled freight car stranded in Chicago? Losing just one car load to frozen switches on the line can cost a shipper $30,000, according to Stephen Bennett, founder and chief operating office for Riskpulse, a San Francisco-based weather analytics firm. The average shipment involves 50 cars per train, Bennett said, and high volume shippers can use five trains a week.
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