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SSB: Nation's Summer 'Normal;' CA and NYC Beware!

April 9, 2001
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SSB: Nation's Summer 'Normal;' CA and NYC Beware!

This summer will not be a particularly hot one, but there is a chance that there will be some extensive heat waves in specific regions, especially in the West, New York and New England according to a national weather assessment by esteemed energy weather forecaster Jon Davis of Salomon Smith Barney. The SSB forecast, which takes into account Sea Surface Temperatures (SST), precipitation outlooks and soil moisture, as well as historical data, raises new hurdles for an already crippled California.

While summer is still a couple months away, the forecast immediately took its toll on gas prices last Thursday. The May futures contract advanced $0.24 Thursday to close at $5.422, near the top of its recent trading range. Even more impressive was the May through October summer strip, which rumbled 24.3 cents higher to close at $5.502.

SSB predicts SSTs in the equatorial Pacific Ocean this spring and summer will be neutral, rather than El Nino (warm) or La Nina (cold). Another important measuring stick, the Pacific Decadal Oscillation (PDO), measures the water temperatures along Pacific Coasts. When the temperature of the water in the Pacific is warmer than normal along the coasts of the Americas, then there is a positive PDO. When it is colder, there is a negative PDO. SSB believes the PDO will be negative this year. During the past 106 years, there have been 34 summers with the neutral SST and negative PDO conditions that SSB expects for this year. Of the 34 summers, 15 featured cooler-than-normal national temperatures, 11 saw normal temperatures and eight were on the warmer side, SSB said in its much-awaited 2001 Spring and Summer Outlook.

The summer of 2000 hit the energy industry hard, as natural gas and electricity were in short supply, sparking a run-up in prices. SSB called the summer of 2000 the eleventh hottest and the twenty-fourth driest summer in the United States during the past 106 years. SSB pointed out that since the 1960s there has actually been a steady warming trend in summer temperatures nationally.

Although history points toward this summer being another hot one, all other indicators SSB studied point to a scenario where a hot summer on a national basis seems the least likely. The firm explained it did not put much weight on the recent history of warm winters since they ended abruptly this past winter.

"It certainly appears to us that the consistent warmth of the 1990s, during both summers and winters, has come to an end," said SSB. "Soil moisture levels going into this warm season indicate a lack of any early heat buildup and point away from an extremely hot summer due to the current wet bias."

After studying past years that fit the criteria of 2001, SSB said, "We expect parts of the West to have a hot summer with numerous heat waves." The other region of the U.S. that should be subject to a heat bias is Florida, "due to the extremely dry conditions in the state as we head into the late spring and summer." The middle of the country is expected to experience a "cool bias."

Also discussing outlooks last week was Dan Guertin, a meteorologist with Sempra Energy Trading. The summer of 2001 will actually act a lot like the summer of 2000, he said at the North American Gas Strategies Conference in Houston last week. He predicted that summer 2001 will be slightly warmer than the 30-year average, but slightly cooler than last summer, with fewer "named" storms in the Atlantic Ocean.

Guertin divided the nation into eight different regions, and for each region, three or four representative cities were selected. The cooling degree days were then totaled for the cooling season (May through September) and averaged to come up with the CDD total for each region.

For the Northeast, which includes Boston, New York, Philadelphia and Pittsburgh, the forecast calls for temperatures to be "very close to the long-term 30-year average and approximately one degree warmer than last year. In addition, more frequent heat waves are likely to occur this summer, especially in July and August."

Southeast temperatures measured for Charlotte, Atlanta, Jacksonville and New Orleans "will play a large role in the overall U.S. gas balance." Guertin forecasts weather to be above average throughout the region. "Drought conditions across Alabama, Georgia and Florida will likely lead to slightly higher daytime temperatures in these three states this summer."

Little Rock, Oklahoma City, Houston and San Antonio were included in the Southern Plains forecast, and Guertin predicts that "severe drought conditions" which have eased in recent months, "are not likely to occur again this summer." He said that temperatures will be "slightly warmer," however, than the 30-year average and slightly cooler than last summer.

Guertin and SSB's forecasts for the West were very similar in that both were "hot." Guertin said the forecast for Las Vegas, Los Angeles and San Francisco calls for temperatures to be "slightly warmer than the 30-year average and in line with the recent 10-year average." Guertin said, "similar to last summer, strong heat waves will occasionally affect the major metropolitan areas of Los Angeles and San Francisco, resulting in daily high temperatures in the lower to middle 90's."

With possible heat waves in the West, SSB said that California "obviously" leads the list of trouble areas for the energy industry this summer with its current electricity shortages. Gas-fired generation is also expected to play a large role, as peaking plants are called into service. The firm warns that using peaking gas-fired plants "inescapably impacts natural gas [storage] injections, one of the key determinants of heating supplies as we enter into the winter of 2001-2002."

In its forecast, SSB also highlighted parts of New England, as well as New York City, as areas that could be strapped for energy this summer. In assessing the California and New York City energy situations, SSB said, "It is hard to fathom the implications of a long-term heat wave in either of those areas; it becomes downright uncomfortable when one imagines such a scenario on both coasts simultaneously."

In the Outlook's conclusion, SSB states that the area from California to the state of Washington are expected to have the greatest cooling needs during the 2001 summer. Cooling demand in the central United States is expected to be near-to-below-normal, while the East is expected to be normal. "It does not look like the cooling season will feature high demand on a widespread basis across the entire U.S. In fact, it appears that the overall demand will average out to be close to normal," SSB said. "The intriguing questions involve regional considerations, as some of the areas that will be most 'energy-stressed' have the greatest potential for periodic bouts of heat and humidity."

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