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What this week’s polar vortex means for energy prices

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A brutal—and potentially historic—cold front is set to hit the U.S. this week, enveloping large portions of the country in below-zero or single-digit temperatures. This wicked winter weather could have longer-term consequences on the energy market and pose challenges for your business. Here’s what you need to know.

 What is a polar vortex? A polar vortex is a large, rotating system of extremely cold air that overlies each of the earth's poles. If a vortex weakens, it can break into masses that push frigid, cold air toward the equator. Such a weather system across Canada or the United States can cause steep drops into subzero temperatures for days, endangering people, animals and property. 

Which areas will be hit the hardest?

The so-called polar vortex is projected to bring temperatures of more than 20 degrees below zero to midwestern states in the beginning and middle of the week, and the extreme cold is forecast to remain for several days. North and South Dakota, Minnesota and Chicago are expected to face especially frigid conditions. Other regions in the northeast and the south may also experience temperatures that are far below seasonal averages. 

How will the weather affect the energy landscape?

When temperatures plummet, furnaces in businesses and homes must work harder to provide heat. And when a deep freeze sets in, the demand for natural gas spikes. That high demand means that pipeline limits will be tested, and suppliers will make increasingly large withdrawals from natural gas storage, which depletes reserves.

This past week, the Energy Information Administration (EIA) reported 2,370 billion cubic feet (Bcf) of natural gas in storage across the U.S. That’s nearly seven percent lower than the EIA’s reported storage total from the previous week, and about 11 percent below the five-year historical average for this time of year. 

With extremely cold temperatures in the forecast and the demand for energy increasing and supply decreasing, expect market prices for both natural gas and electricity to go up this winter. For businesses that can’t predict expenses with fixed rate plans, that likely means volatile energy costs in the days to come.

How can I prepare for the extreme cold?

While you can’t control the weather, you can plan for it.

Consistent energy supply is critical for businesses to maintain operations and reduce financial risks. In addition to getting a fixed power or gas commodity price, you may be able to insulate your organization against supply disruptions caused by weather events, as well as equipment failures and power surges in order to manage reliability and continuity.

For tips on how to prepare your business for extreme cold and winter storms, check out our recent post, or reference our contact page to assist with outages and emergencies. 

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Posted: January 29, 2019