Hurricanes disrupt oil production in the Gulf of Mexico because producers shut in oil platforms to safeguard lives and prevent damage. We examine the effects of these temporary oil supply shocks on real economic activity in the United States.
Do technological improvements mitigate the potential damages from extreme weather events? We show that hurricanes lower offshore oil production in the Gulf of Mexico and that stronger storms have larger impacts. Regulations enacted in 1980 that required improved offshore construction standards only modestly mitigated the production losses.