During the week of January 16-22, 2000, residents of New England and the Middle Atlantic States experienced a severe cold snap during which temperatures shifted from significantly warmer than normal to 24 percent colder than normal.
The drop in temperatures had several consequences. Demand for natural gas and distillate fuel oil (including heating oil), both used for space heating, rose sharply. Supply constraints and the adverse weather impeded delivery of both fuels. Some natural gas customers without guaranteed service contracts saw their deliveries interrupted (see figure). This led in turn to purchases of other fuels, especially heating oil and other petroleum products, adding to the pressures on supply.
As these forces converged, natural gas and distillate prices began to soar. From the 11th of January to the 20th, natural gas spot prices on the New York City market shot up from $2.65 per million Btu (MMBtu) to $15.34 per MMBtu, an increase of nearly 480 percent. Heating oil spot prices also rose, by 133 percent at New York Harbor from January 14 to February 4. New England residential heating oil prices jumped 66 percent during the period.
|
| Source: Energy Information Administration. |
Concern about the price rises and supply constraints prompted a series of public meetings, at which some participants suggested that interruptible gas service contracts--by shifting demand to backup fuels when tight gas supplies forced service interruptions--were a key factor in the heating oil price spikes. Senator Joseph Lieberman subsequently requested the Department of Energy (DOE) to study the matter. The Energy Information Administration (EIA), the independent statistical agency within DOE, then surveyed major gas suppliers and customers in the Northeast. Impact of Interruptible Natural Gas Service on Northeast Heating Oil Demand reports the results of that survey and analysis.
During the peak week (January 16-22), reported gas service interruptions in the Northeast represented 49 percent of planned service levels to interruptible customers. The interruptions share of planned deliveries was much more pronounced in New England than in the Middle Atlantic region.
Reported gas service interruptions for northeastern customers using distillate fuel as backup were the equivalent of about 78 thousand to 84 thousand barrels of distillate per day during the peak week. Actual purchases of distillate were probably less than the calculated equivalent volumes, since some customers drew upon stocks and others reduced operations or shut down. Data from a small sample of New England customers, while not statistically representative of the whole Northeast, suggest that less than half the volume of gas interrupted during January and February was replaced with distillate purchases.
Although interruptions of gas service may have led to less incremental distillate demand than expected, their influence could grow. Heating-oil sales volumes in the Northeast are shrinking. As a result, suppliers are not making provision for larger inventories and more extensive infrastructure. The impact of current levels of fuel switching relative to the regional distillate supply could grow.
Impact of Interruptible Natural Gas Service on Northeast Heating Oil Demand, SR/OOG/2001-01; 102 pages, 9 tables, 23 figures. This report is only available via the Internet.
If you are having technical problems with this site, please contact the EIA Webmaster at wmaster@eia.doe.gov or call 202-586-8959. For general information about energy, contact the National Energy Information Center at 202-586-8800 or infoctr@eia.doe.gov.
URL: http://www.eia.doe.gov/emeu/plugs/plneheat.html
File last modified: February 23, 2001