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In This Issue

Brutal Winter, and Painful Rises in Heat Costs

FERC to Impose New Security Rules on Utilities

Natural Gas and Oil Market Update

EIA - Weekly Natural Gas Storage Report

NYMEX Natural Gas Week-to-Week Price Change

Natural Gas Futures - Five Year Price


NOAA 6 to 10 Day Outlook
Color indicates the probability of forecasted temperatures being above or below a historical average for the period.


Brutal Winter, and Painful Rises in Heat Costs

The New York Times | March 13, 2014

Opening up heating and electricity bills has been a bit of a shocker in recent weeks. Exactly how shocking became clear on Wednesday when the Energy Department released a report showing just how expensive it was to keep warm and cook dinner this winter.

Those living in mostly rural and Midwestern areas who depend on propane are expected to spend 54 percent more this winter than last. Those who rely on heating oil, largely in the Northeast, will be paying 7 percent more. Natural gas consumers will pay 10 percent more and electricity consumers will pay 5 percent more.

The department estimated that winter energy costs for heating with propane in the Midwest would be $2,212 a household, $759 more than it projected in October. It estimated that homes using heating oil would spend $2,243, $197 higher than it had projected.

Economists have warned that the increased heating fuel prices are taking dollars out of the wallets of consumers who otherwise might spend their money on clothes and restaurants. But the impact is probably going to be neutralized at least in part by the decline in gasoline prices, which this winter have averaged about 25 cents a gallon less than last year.

“The sustained cold weather that overtook much of the United States during January and February increased demand for space heating fuels, disrupted crude oil and natural gas production, as well as refinery, rail and pipeline operations,” the report said, “and challenged the ability of energy infrastructure to deliver fuel.”

The cold caused complications across the energy supply chain. A sudden jump in natural gas prices raised costs for refineries that use the gas as a fuel but also as a feed stock for petrochemical products. Snow slowed railroads, which have become increasingly important for the delivery of crude from North Dakota. Unloading of fuel vessels was delayed in New York Harbor. In the Midwest, ethanol pipelines froze. Winter storms and fog even temporarily delayed shipments on the Houston Ship Channel between shipping terminals and refineries.

The harsh winter strained inventories of energy suppliers and forced utilities to switch fuels for their generators to meet demand. Limited natural gas supplies and insufficient gas pipeline networks, for example, forced utilities to use other heavier, more polluting petroleum fuels like heating oil. After years of declines, consumption of such fuels more than doubled, to 471,000 barrels a day in the week that ended Jan. 17, from the 220,000-barrel-a-day average consumed in December and early January.

The Energy Department reported that this winter the Northeast was 13 percent colder and the Midwest and South were both 19 percent colder than last year, while the West was 5 percent warmer. The frigid weather forced consumers to use more heat and electricity, but it also drove up the prices of the fuels.

Wholesale prices for propane and heating oil are quickly reflected in the prices consumers pay their utilities. Natural gas rates tend to rise more slowly because utilities normally sign long-term contracts for their supplies. Electricity for space heating is most popular in the Southeast and the West, areas that generally were either warmer this winter or did not suffer prolonged periods of severe cold.

The most serious disruption came for consumers of propane, a byproduct of natural gas production and crude oil refining often used for portable electrical generation and home heating. Even while production of the fuel is up 15 percent from a year ago, inventories in early February were nearly 50 percent below last winter’s. The report noted that inventories were low at the beginning of the winter because of a large corn harvest during a particularly rainy few weeks. While farmers were using unusually large amounts of propane to dry their wet corn crop, energy companies were exporting increasing amounts of the fuel.

The extreme cold also slowed the frenzy of oil drilling and production in shale fields around the country, particularly in North Dakota. Drillers had to rely heavily on additional heating equipment, in part to keep the large volumes of water required for hydraulic fracturing from freezing. Heavy snow also interfered with oil extraction and road transportation of equipment.


FERC to Impose New Security Rules on Utilities

Market Watch | March 13, 2014

Federal energy regulators plan to impose new security rules on electric utilities to make sure they protect major substations and other facilities critical to the operation of the electric grid.

In an order issued late Friday, the Federal Energy Regulatory Commission said it would require physical protection for locations which, if badly damaged, could produce cascading blackouts or other widespread problems.

The agency's action follows recent articles in The Wall Street Journal about the vulnerability of the electric grid to physical attack. Gunmen who shot up a California substation last April did so much damage that it took workers almost a month to repair 17 large transformers that help send power to Silicon Valley. No one has been arrested in the incident.

The federal agency directed a standards-writing organization called the North American Electric Reliability Corp. to work with utilities to determine which sites are essential, define threats and develop physical-protection standards. The standards should be based on "objective analysis, technical expertise and experienced judgment," the agency said.

The standards-drafting group must submit a proposal in 90 days. Under the system established by Congress, FERC lacks authority to rewrite proposals; it must accept or reject them or ask the group to revise them.

The agency provided no detailed guidance on what it wants from the standards-writing group, which is dominated by utilities which would face fines of up to $1 million a day for each infraction of new rules.

Jim Fama, vice president of the Edison Electric Institute, an industry trade group, said utilities were pleased FERC doesn't expect a "one-size-fits-all solution" but invited plans to be tailored to specific locations and security needs. He said "standards are static, while threats to the grid are dynamic."

The grid is designed to withstand the loss of any single substation, so in a sense no single facility is vital to the bulk power system. But any of the nation's three electrical regions--East, West and Texas--could become unstable if multiple critical substations were lost, experts have warned.

In a statement, FERC's acting chairman, Cheryl LaFleur, said the agency was persuaded to act "because the grid is so critical to all aspects of our society and economy."

Even as it moved to set standards--something members of Congress also have requested recently--the agency broached the topic of moving the standards-setting process out of the public eye.

In a separate written opinion, Commissioner John Norris said he wants Congress to act to allow the agency to collect but withhold from public release "sensitive security information regarding the physical vulnerabilities of our grid."

He asked Congress to create "a clearly defined exemption to the Freedom of Information Act to allow for such exchange of information without fear of disclosure."

Natural Gas and Oil Market Update

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Natural Gas supplies Down 195 bln Cubic Feet: EIA

MarketWatch | March 13, 2014

Natural-gas futures on Thursday continued their descent after the U.S. Energy Information Administration reported that supplies of natural gas fell 195 billion cubic feet for the week ended Feb. 28. The decline matched market expectations as analysts surveyed by Platts forecast a fall of between 193 billion cubic feet and 197 billion cubic feet. Total stocks now stand at 1.001 trillion cubic feet, down 958 billion cubic feet from a year ago and 858 billion cubic feet below the five-year average, the government said. April natural gas was at $4.41 per million British thermal units, down 8 cents, or 1.9%. It was trading at $4.42 before the data.


arrow upWTI Crude Rebounds From One-Month Low; Brent Stable

Bloomberg | March 13, 2014

West Texas Intermediate crude rebounded from its lowest closing level in more than a month, narrowing its discount to Brent, amid speculation earlier losses were excessive.

Futures in New York rose as much as 0.6 percent. WTI lost the most in two months yesterday amid the announcement of a test sale of oil from the Strategic Petroleum Reserve, while the Energy Information Administration reported a 6.18 million-barrel jump in crude supplies, triple the median analyst estimate.

WTI for April delivery gained as much as 61 cents to $98.60 a barrel and was at $98.24 as of 11:59 a.m. London time in electronic trading on the New York Mercantile Exchange. The contract dropped 2 percent to $97.99 yesterday, the biggest decline since Jan. 2 and the lowest close since Feb. 6. The volume of all futures traded was about 26 percent above the 100-day average.

Brent for April settlement slipped 11 cents to $107.91 a barrel on the London-based ICE Futures Europe exchange. The European crude traded at a premium of $9.65 to WTI on ICE. The spread closed at $10.03 yesterday, the widest in six weeks.

EIA - Weekly Natural Gas Storage Report

EIA - Weekly Natural Gas Storage Report


Working gas in storage was 1,001 Bcf as of Friday, March 7, 2014, according to EIA estimates. This represents a net decline of 195 Bcf from the previous week. Stocks were 958 Bcf less than last year at this time and 858 Bcf below the 5-year average of 1,859 Bcf. In the East Region, stocks were 395 Bcf below the 5-year average following net withdrawals of 95 Bcf. Stocks in the Producing Region were 335 Bcf below the 5-year average of 737 Bcf after a net withdrawal of 79 Bcf. Stocks in the West Region were 127 Bcf below the 5-year average after a net drawdown of 21 Bcf. At 1,001 Bcf, total working gas is below the 5-year historical range.

NYMEX Natural Gas Week-to-Week Price Change NYMEX Natural Gas Week-to-Week Price Change

Natural Gas Futures - Five Year Price

NYMEX Natural Gas Week-to-Week Price Change - Five Yearly Snapshot
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