Energy prices dictated by weather

The oil and natural gas industry has made significant steps in eliminating risk throughout the processes, but despite their best efforts, they still have no control on one of the most significant variables to their profitability: the weather.
by Adam Wilmoth Modified: February 21, 2014 at 3:00 pm •  Published: February 20, 2014
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Business leaders despise few things more than uncertainty.

They seek to eliminate as much uncertainty as possible throughout every step of their operations.

The oil and natural gas industry has used technology over the past decade to significantly reduce risk. Three-dimensional seismic readings and directional drilling have all but eliminated the dry hole by allowing operators a much better view of what lies underground and far greater control of how the drill bit snakes to its target.

Out of more than 2,500 wells drilled in the state in 2011, only 92 were dry.

While the risk of dry holes has been greatly reduced, far more expensive modern drilling processes mean a well could produce a decent amount of oil and natural gas, but still not be profitable. Even there, companies are reducing risk by lowering costs and improving their understanding of the rocks.

The oil and natural gas industry has made significant steps in eliminating risk throughout the processes, but despite their best efforts, they still have no control on one of the most significant variables to their profitability: the weather.

Hot summers lead to a surge in demand for fuel as millions of American homes and businesses crank up their air conditioning.

Cold winters have an even greater effect by driving up demand for both electricity and heating fuels such as natural gas, propane and fuel oil.

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by Adam Wilmoth
Energy Editor
Adam Wilmoth returned to The Oklahoman as energy editor in 2012 after working for four years in public relations. He previously spent seven years as a business reporter at The Oklahoman, including five years covering the state's energy sector....
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