The season of salty roads, white lawns, and windshield ice is upon us. It’s winter, the part of the year where businesses across the board tend to just slug by. A couple years ago, Panera Bread announced a lackluster quarter of growth smack dab in the middle of the winter season.
They blamed the snow, and just like Panera Bread, the oil and gas industry tends to feel the effects of a harsh winter as well.
Investopedia states that weather is a demand-side factor affecting prices. That simply means the weather can affect the way consumers use oil and gas. How exactly are these effects felt?
Well, here’s a few.
1. Demand for natural gas increases because homes need to be heated! In 2015 the EIA estimated households would use 60.2 gallons of natural gas to keep warm during the winter season. Multiply that by the 59 million American homes that use natural gas, and that’s pretty substantial.
2. If temperatures drop below a certain point, oil production can’t operate at max capacity. That’s less product getting injected into the supply stream, which definitely affects demand locally, nationally, and sometimes globally.
3. Crude oil freezes between -40 and -60 degrees Fahrenheit—if temperatures drop that low, that’s a physical effect of winter on oil.
4. Snow causes a freeze in transportation. With less cars on the road, there’s less oil being consumed. And when multiplied across millions of people and cars, that’s a pretty substantial loss for major oil companies. Also, think about all the flights that get grounded!
5. A freeze in transportation also affects the supply of oil to gas stations. If tankers can’t get on the road, then there could be a temporary discrepancy in supply as well.