Energy Prices Trending Downward
El Niño and coastal storms set to impact temperatures across the country
Traditionally, the approach of winter means a rise in fuel prices juxtaposed with a steep drop in temperatures, but this year is looking to defy those expectations.
In Massachusetts, for instance, heating oil fell to an average price of $2.49 a gallon in late August, per the Boston Globe. That price is down more than 30 percent from the same period last year. In Maine, heating oil prices are currently below $2, marking the lowest statewide average price in 10 years. Similar decreases are being seen across the country, from New Jersey to Alaska.
According to the U.S. Energy Information Association (EIA), those price drops are the beginning of a long-term trend rather than just a short-term reprieve. The EIA predicts residential heating oil will cost $2.73 per gallon over the course of 2015 and then continue dropping to $2.65 per gallon in 2016.
Similarly, according to the EIA, U.S. regular gasoline monthly retail prices averaged $2.64 per gallon in August, a decrease of 16 cents per gallon from July and 85 cents per gallon from August 2014. The EIA expects monthly gasoline prices to decline from the August level to an average of $2.11 per gallon during the fourth quarter of 2015. The EIA also forecasts U.S. regular gasoline retail prices will average $2.38 per gallon in 2016.
CAUSE AND EFFECT
In regard to heating oil, the effect of changing prices on contractors may be faltering, as multiple contractors in both the U.S. and Canada said heating oil is losing prevalence in the HVAC industry.
“We’re one of a handful [of contractors] left doing heating oil, and there is no effect anymore,” said D. Brian Baker, president, Custom Vac Limited, Winnipeg, Manitoba, Canada. “Oil is gone, for the most part, unless it’s in a remote location, and the price is what it is. We just continue to offer services in all energy sectors and let customers know we have the ability to help them operate efficiently and problem-free, no matter what.”
AtlasCare is in a market that is almost entirely served by natural gas, said Roger Grochmal, chairman and CEO, Atlas Care, Toronto. “There are almost no homes served by heating oil or propane. Now, having said that, our plans are built around hitting our targets regardless of the impact weather may have on the price of heating fuel. The benefit we get or don’t get from these external items allows us to hit our stretch goals if everything lines up. As an industry, we have so much to offer to homeowners. We have features and benefits to offer that make our products attractive without requiring the old furnaces to break down first.”
Gas prices stay pretty steady in metro Detroit, said Matt Bergstrom, owner, Thornton and Grooms, Farmington Hills, Michigan. “We’ve seen a slow, continuous uptick in price over the years, but some of the bigger increases that have been forecasted have never occurred. Typically, we see a push after folks have gotten the big utility bill versus all the hype or talk of rising rates.”
Alongside those gasoline and heating oil prices, natural gas has also seen its price drop since 2014, when it was $10.94 per thousand cubic feet (mcf). It fell to $10.33 in 2015 and is projected to drop to $10.25 in 2016.
“Low natural gas prices will continue to encourage oil-gas conversions where applicable,” said Brian Feenie, HVAC manager, Moyer Indoor Outdoor, Souderton, Pennsylvania. “The way to prepare for that is to clearly market that the company provides that service. As far as the pricing just being low, it has no real impact based on fuel cost alone.”
Feenie also said his company has a focused and concerted effort on completing Autumn and Winter tune-ups earlier than they had in the past.
“Essentially, we’re getting these tune-ups cleared off the schedule in July, August, September, and October so we have ample capacity for emergency service when it’s needed the most,” said Feenie. “We essentially increased our capacity by 35-50 percent by doing this and not having to over-hire for the season.”
EL NIÑO AND THE STORMS
As for actual temperature outlooks, it appears El Niño and coastal storms will take precedence across the U.S. this winter.
“El Niño — the warmer-than-normal sea temperatures between northern Peru and Indonesia — is the big weather story for the upcoming winter, but it isn’t the whole story,” said Chris Orr, certified consulting meteorologist. “The weather will be influenced by North Pacific sea-surface temperatures that are similar to last year. The North Atlantic will also drive this winter’s weather pattern. El Niño will be at its strongest in December and it’ll likely be one of the strongest El Niño events since 1997-98. It will be the key to bringing downpours and strong winds to the Southwest as storm systems churn eastward across the north Pacific Ocean. The news will be awash with headlines about damaging winds, flash floods, and mudslides across California, Nevada, Arizona, and New Mexico. All the cloud cover and precipitation will prevent the sunshine from warming the air too much, so temperatures will be below normal across most of the southern U.S.”
Those lower temperature predictions from Orr will follow a 2014 winter that finished as the 19th warmest over the last 120 years, per the Weather Channel. In fact, last year’s winter season temperatures across the country were 2.1°F above the 20th century mean, according to the National Oceanic and Atmospheric Administration (NOAA’s) National Climatic Data Center.
“Florida ought to wind up with above-normal rainfall and near-normal temperatures,” said Orr. “The Pacific Northwest will be under the influence of warmer-than-normal sea-surface temperatures to the West. Temperatures will be warmer than normal across the Northwest. The ocean temperature pattern will also force storm systems to go around the region and instead go across northwest Canada and Southern California.”
Orr also noted temperatures in the Great Lakes region will not be quite as cold as a year ago, but snowfall will hold steady with numbers from last winter.
“The other big weather story will be strong East Coast storms, each carrying the potential for a lot of snow and strong winds,” said Orr. “The Gulf Stream is much warmer than normal, and those warm waters will feed storm systems moving up the East Coast. Hardest hit will be the Mid-Atlantic states and coastal New England, where snowfall might be 150 percent of normal or more.”
Publication date: 10/26/2015