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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Difficult winters also can affect supplies by slowing oil and gas operations.

Most mid-size and large oil and natural gas companies either have meteorologists on staff or on contract to help them predict how weather patterns will affect commodity prices.

Despite the efforts, few saw this winter coming.

In the fall, there were various projections that winter could be colder and wetter than normal. But none called for a polar vortex and wave after wave of frigid weather to stretch throughout the Midwestern and Eastern population centers and as far south as Atlanta.

Just three months ago, natural gas futures contracts remained between $3 and $3.50 per thousand cubic feet for more than a year out. This week, the futures price for March delivery jumped as high as $6.15.

The unusually warm winter last year had the opposite effect, causing natural gas prices to fall. But while few expected such weather this year, none should be surprised at the effect weather can have on the industry.

Risk reduction is essential to any business, but in the oil and gas industry, one of the biggest factors remains beyond control.


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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