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Colder Winter Ahead: Preparing For Higher Prices


The always reliable Old Farmer’s Almanac is calling for a harsher “cold and snowy” winter in the Northeast with “wintry chill, wet and white” weather for the mid-Atlantic. The Great Lakes Region doesn’t fare much better with their 2018 outlook calling for a “cold but average snowfall season ahead” while the Gulf Coast gets a “chilly, wet and soggy” forecast. The unpredictability of a La Nina forming this season could also make things a lot colder.

So what does that mean for you? Well, unless you are fortunate enough to be in the Midwest or the west coast of the U.S., it looks like everywhere else should be bracing for a winter that promises to be more unpleasant than what we are accustomed to. As we transition from Fall to Winter, natural gas, diesel and furnace oil inventories are at the lower end of the five year average with diesel sitting some 3.6 million barrels below that benchmark. According to the U.S. Energy Department’s EIA (Energy Information Administration), heating bills this season will rise 17% for furnace oil, while natural gas is expected to record a 12% hike. All of this assuming winter doesn’t get worse than expected, in which case the EIA’s projections may be a tad too conservative. If the diesel inventories are considerably lower than in previous years, the picture for natural gas isn’t much better as storage levels are at their second lowest end-of-season level since 2009.

Adding grist to the mill is the overall robust demand picture for gasoline which, as we saw in Wednesday’s weekly status report by the EIA, contributed to a 4.4 million barrel draw in stockpiles. When to consider that an increase in the use of diesel or distillates due to prolonged cold weather, a rise in the price of oil is almost inevitable, regardless of whether or not OPEC and other producing countries like Russia agree to an extension of crude output curbs. As a consequence, gasoline prices appear to be heading towards sustained higher prices, breaking the downward price trends we see during the late Fall and Winter seasons.

For 2018, Old Man Winter looks set to force open our wallets to keep warm and at the pumps.

Senior Petroleum Analyst, Canada

Dan is a skilled and noted bilingual (French and English) consumer advocate specializing in energy and current affairs. Known as Canada's “Gas Guru,” he founded to better help motorists anticipate the price of gasoline in advance across Canada. He has over three decades of experience in the petroleum industry, as a parliamentarian and an analyst.