All of the climate trends pointed to this past winter as being especially cold, and the warm weather completely “baffled” one of the leading meteorologists in the country. However, the warm outcome only pointed to how difficult long-term seasonal forecasting is and how much is still being learned in making predictions, said Jon Davis, the chief meteorologist for Salomon Smith Barney on Wednesday at the GasMart/Power 2002 conference in Reno.

With his summer forecast scheduled for release the first week of April, Davis said that it will only be a “starting point” for the forecast, a process that has to be replayed day by day. Davis said that the “comfort zone” in truly accurate forecasts is between six-to-eight days. Beyond six-to-eight days, “it depends,” but is improving slowly. “Improvement in forecasting is a slow process but the trend is significantly improving and will continue through this decade,” he said.

“This winter was incredibly warm,” said Davis, and “we did not forecast it by any means. So much was pointing to it not being warm. It just shows how difficult long-term forecasting is. It’s the reason we have to come to the office every day. In the end, this winter was a learning experience.”

When he first began his career in 1985, Davis noted there were no “energy” meteorologists, but especially because of catastrophic weather events over the past 20 years that affected commodity markets, there now are teams of meteorologists at energy companies. El Nino in 1982-83 was the first “big” event, and then Hurricane Andrew in 1992 impacted natural gas production in the Gulf of Mexico, which impacted the industry almost five years, he said. Severe weather events demonstrate “dramatic vulnerability,” and propelled energy companies to begin taking a closer look at forecasts.

However, if 10 meteorologists were given the same information, they would probably come up with 10 different forecasts, and for that reason, Davis said the “ensemble” method of forecasting is best — the mean trend will provide the best information.

Paul Corby, executive vice president of Planalytics Inc. based in Wayne, PA, shared his extensive experience in using analog forecasts versus numerical forecasts. Corby was the chief architect of Planalytics’ first product, Weathernomics Gas Buyer, which helps companies with energy risk management. Clients include PECO/Exelon, Dominion Resources and Southern Union.

“If people had been more aware,” and “had they understood the weather and supply/demand fundamentals…then their average cost of gas in 2000 would have been reduced dramatically,” said Corby. “The problem was, no one was looking at the fundamentals until it was too late.”

Corby suggested that to control the weather and price volatility and to manage risk more effectively, companies should diversify — not from the commodity, but from how the commodity is purchased. “Do have contract flexibility…have a fraction of the portfolio in short-term contracts…do not hedge the entire portfolio.” He said, “do not attempt to fight short-term price fluctuation.”

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