Where I live, in that part of the country formerly known as the Snow Belt, we haven't seen the white stuff in 40 days Can we make any progress toward a sustainable energy future if the weather doesn't cooperate?

Petroleum and Natural Gas Watch

by Michael Vickerman, RENEW Wisconsin
January 13, 2007, Vol. 6, Number 1

This winter's weather has been the stuff of front-page stories, though not for the usual reasons. Where I live, in that part of the country formerly known as the Snow Belt, we haven't seen the white stuff in 40 days. As we enter the coldest seven-day stretch in the calendar year, Madison's largest lakes remain more than 99% ice-free. Even along shallow Monona Bay, where the ice-fishing season typically lasts three months, guys in snowmobile suits have given way to joggers in shorts and sweatshirts. Except for a slushy snowfall on December 1st, it has been clear sailing for commuter bicyclists like myself. On some days I didn't even wear gloves!

A few days ago, the National Climate Data Center reported that the United States recorded its warmest year in 2006. The unusually balmy conditions that have prevailed this past month—it was the fourth warmest December on record--lifted 2006's temperatures into record territory. Thus far, Ol' Man Winter has confined his cantankerous self to just a few memorable visits to Colorado and neighboring states; elsewhere, he has been MIA since Thanksgiving.

Can this extraordinary mild weather—31 straight days with high temperatures in Madison above the freezing mark--be simply an outgrowth of the current El Niño phenomenon? Or is it yet another indication that Mother Nature is running a fever, brought about by our addiction to fossil fuels. Is Ol' Man Winter's long absence from these parts simply a one-time-only event or does it mean the Snow Belt is migrating northward?

Not everyone is overjoyed by the weird winter weather. While it's been great for city joggers and bikers, the warm spell has been positively unkind to winter sports enthusiasts from cross-country skiers to ice fishermen. Moreover, it has affected the entire state; there is virtually no snow cover anywhere, even along Lake Superior. Businesses that depend on outdoor winter pursuits have to be hurting.

To the extent that human-induced climate change is responsible for winter's late arrival to many parts of the Northern Hemisphere, there is a peculiar irony at work: warmer weather means less energy going to heat homes and buildings. In a season when stockpiles of heating oil traditionally are drawn down, reduced demand has left inventories brimming with unused fuel. This anomalous weather is "confusing" not only the flora and fauna in our hemisphere, but also the strangely detached subspecies of humanity known as energy traders. The way they look at the situation, there's way too much oil on the market, and they're bailing out of long positions as fast as they can. Spot market prices have nosedived in the last two weeks, leaving the per barrel price of oil hovering just above the $50 mark. Such low prices cannot last.

The price of natural gas is even more sensitive to winter weather extremes than that of petroleum, but prices have held steady this month. Yes, natural gas consumption this month will be well below historic averages, but so too will domestic output and imports from Canada. In fact, the decline has already begun, which may be one reason why prices haven't fallen in tandem with the oil markets. But natural gas prices haven't soared either, as you might expect. Indeed it is entirely possible that the drop in demand is, for the moment, large enough to mask a very troubling downturn in output.

Even if 2007 comes and goes without a single hurricane moving in to menace the Gulf of Mexico energy complex, natural gas prices are certain to rise significantly because energy companies are not drilling new wells with same zeal that they did in 2005 and in much of 2006. Thus, declining output from North American sources is certain to accelerate this year. With daily yields per well declining by two-thirds in the last eight years, it will take a far higher price than $6.00/MMBtu to motivate new exploration and development activities.

How quickly prices rise will be determined by an intricate interplay of summer weather and industrial usage, led by ethanol production facilities, which burn a lot of natural gas. Increasing ethanol production should expand U.S. supplies of motor fuels, but at the risk of driving natural gas prices to intolerable levels.

As a result of this balmy stretch, several troubling thoughts have taken root in my brain: what if people come to regard climate change as something that could save energy in the long run? Could expectations of warmer winters lull Americans into a false sense of security? How many homeowners will put off valuable insulation projects and installations of solar water heaters because they're not feeling any pain from utility bills? And the kicker: can we make any progress toward a sustainable energy future if the weather doesn't cooperate?

Petroleum and Natural Gas Watch is a RENEW Wisconsin initiative tracking the
supply demand equation for these fossil fuels, and analyzing its effects on prices,
consumption levels, and the development of energy conservation strategies and renewable energy alternatives. For more information on the global and national petroleum and natural gas supply picture, visit "The End of Cheap Oil" section in RENEW Wisconsin's web site: www.renewwisconsin.org. These commentaries also posted on RENEW's blog: http://www.zmetro.com/community/us/wi/madison/renew
and Madison Peak Oil Group's blog: http://www.madisonpeakoil-blog.blogspot.com