UPDATE: 1-in-8 Chance Of Hurricane Hitting Gulf Spill--Report

30th Jun 2010 16:10

(Adds outlook for storm season, prediction on spread of spill.) By Erik Holm Of DOW JONES NEWSWIRES NEW YORK (Dow Jones)--Disaster models suggest a 1-in-8 chance of a hurricane hitting the Gulf oil spill this year, with the odds of a direct hit rising due to concern that the storm season will be a busy one, according to a firm that predicts catastrophes. The models indicate a 7% possibility of an intense storm of Category 3 or higher hitting the slick, bringing a strong storm surge and "the potential to carry tar deposits far inland," wrote Risk Management Solutions in a report released Wednesday. Gulf Coast residents have been fretting about a direct hit on the still-growing slick since the start of the Atlantic hurricane season on June 1. The damage from a major storm would have wide-reaching effects on a coastal economy that is already suffering from shuttered beaches, declines in tourism and environmental damage. The odds of a major storm striking the spill would be just 4% if the Gulf of Mexico were facing the prospect of an average storm season, RMS said. But this isn't an average year. The National Oceanic and Atmospheric Administration estimates eight to 14 hurricanes and projects three to seven storms of Category 3 or higher. That is the agency's most extreme forecast since it began releasing its predictions more than a decade ago. While a direct hit is the worst-case scenario, a storm passing within 100 miles of the slick "has the potential to bring waves that break protective booms and allow the oil to be displaced into coastal salt marshes and beaches above the tide line," RMS said. The modeling firm said there was a 40% chance of a hurricane or tropical storm coming that close to the spill by the end of August. The first storm of the season, Hurricane Alex, was trundling across the Gulf towards the coast of Mexico on Wednesday, but forecasters predict the Category 1 storm will stay well outside the 100-mile buffer. RMS is one of a handful of companies that build models to predict the costs of catastrophes, including earthquakes, flooding, and terrorist attacks. It sells its work to businesses, primarily insurance companies. The spill will cost insurers between $1 billion and $3 billion, according to the company. BP PLC (BP, BP.LN), which will shoulder most of the costs, didn't buy insurance and will bear most of the costs itself. The movement of the spill, and its location, indicated that it was "unlikely that significant quantities of the oil spill will pass toward southern Florida or into the Atlantic Ocean," RMS said. -By Erik Holm, Dow Jones Newswires; 212-416-2892; [email protected] (END) Dow Jones Newswires June 30, 2010 11:10 ET (15:10 GMT)