Cold Weather Impacts Energy Pricing
Jan 24, 2014

In the 4th week of January 2014, weather-fueled demand for natural gas, electricity and propane have surged to record levels due to extended cold-weather temperatures in the U.S. Northeast and Midwest regions.

Demand for heating fuels is soaring

They called it Janus – a winter storm that rocked the Northeast and Mid-Atlantic regions with the biggest snowfalls of the season accompanied by a sustained blast of cold temperatures, well below freezing. Meanwhile, the Midwest has also experienced very cold temperatures that are expected to remain until the end of January. The winter weather has forced people indoors to try and stay warm and so the demand for heating and electricity has increased drastically.

Supply constraints

Supply and delivery of natural gas, heating oil and propane have encountered many challenges due to a variety of factors including but not limited to the winter weather. Roads and railways obstructed by snow and ice have prevented trucks and trains from being able to deliver propane and heating oil. Inadequate pipeline infrastructure and well freeze-offs have also constrained supplies for propane and natural gas.

Impact on pricing

Natural gas and electric providers are adjusting their pricing models to account for the cold temperatures. The extreme volatility in the natural gas and electricity markets due to the weather will affect pricing over the next couple of months and may impact long-term pricing.

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