Meteorological Trends

Tina Hampton |

Download PDF Meteorological Trends can cause negative side effects on the fuel industry.

“If you don’t like the weather, wait five minutes.” Wit goes a long way with the weather in this part of the world. It affects everything from daily routines to people’s moods, and in more extreme cases, our natural resources and the economy.

Gas prices are no exception. While the weather isn’t as likely to have an adverse affect on activity at retail outlets themselves, the change in prices may more so be reflected by what is happening at refineries and terminals, both locally and globally. 

The most recent example is the “Polar Vortex”. The condition brought record cold temperatures across North America and some unfavorable situations in the fuel industry:

  1. Loss of steam – shut down at PBF Energy in New Jersey.
  2. Instrument failure – units tripped offline at Valero Energy in Tennessee.
  3. Power outage – shut down at Korea National Oil Corp’s in Newfoundland.
  4. Frozen lines – ethanol terminal at Kinder Morgan in Illinois.
  5. Power failures – Colonial Pipeline Co.’s transport system, Gulf to East Coast.

In total, production loss at refineries was estimated at 800,000 barrels a day. With supply down and demand up, oil prices rose daily and gas prices were at the highest in a year and a half.

Outside of weather, but still occurring through the winter months, is what’s called the “turnaround period.” Now is typically the timeframe that refineries take for planned shutdowns to do routine maintenance or plant upgrades, which also slows production.

On the reverse end of the thermometer, warmer temperatures have an impact as well. The Natural Resources Defense Council warns about extreme weather patterns that are continuing to emerge:

  •   More powerful and dangerous hurricanes.
  • —  Increase in likelihood of drought and wildfire.
  • —  Intense rainstorms creating risk of floods.

These systems have already been leaving their mark with devastating events in some of the top oil-producing countries:

  1. Hurricane Katrina, 2005 – Approx. 1,833 deaths, estimated $125 - $150 billion in lost revenue, and 8 million gallons of oil spilled.
  2. Russian heat wave, 2010 – Estimated 55,000 deaths, one quarter of crops lost, and about $25 billion US in lost revenue.
  3. Flooding in China, 2013 – 120 million affected, including 774 deaths, $51.48 billion US in losses with 256,000 hectares of failed crops.

Even if fuel supply isn’t directly disrupted, demand can go up or down as a result of ensuing damages, loss and change in economic conditions. All of these things will impact prices.

How the weather and related events are reported also affects prices. The market focuses on either positive or negative news; so a negative story would cause a price drop. Even a change in forecast can result in a price swing.

If you don’t have time to stay caught up on all the latest news and weather, at least make time to meet with a good fuel distributor. With knowledge and expertise on markets and the industry, they will be able to advise you on such things as pricing, potential risk factors and bulk purchasing.

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