Weather Central
Weather plays a significant role for energy demand and supplies. Severe weather can have a drastic impact on demand such as a major cold
spell during peak winter heating demand or hot spell at peak cooling during the summer will drive spikes in demand. Also, severe weather
such as hurricanes in the Gulf of Mexico will have a major impact on oil and natural gas production/supplies as well as refineries. Given the
volatility of the weather coupled with energy's major role as a global economic engine, energy risk management remains the key to success
regardless if you are a hedger or speculator in the market.
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The National Weather Service Climate Prediction Center's Temperature forecast
maps are a major tool that CRM uses to determine weekly heating and cooling
demand. The 6-10 day Outlook gives the confidence that a forecaster has, given as a
probability, that the observed temperature, averaged over upcoming days 6, 7, 8, 9
and 10 will be in the range of one of three possible categories - below (B), normal (N),
or above (A). For any calendar 5-day period, these categories can be defined by
separating the 30 years of the climatology period, 1971-2000 (30 years), into the
coldest 10 years, the middle 10 years, and the warmest 10 years.
Because each of these categories occurs 1/3 of the time (10 times) during 1971-2000,
for any particular calendar 5-day period, the probability of any category being
selected at random from the 1971-2000 set of 30 observations is one in three (1/3), or
33.33%. This is also called the climatological probability. The sum of the climatological
probabilities of the three categories at any point on the map is 100%.
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The National Weather Service's Climate Prediction Center is another tool that CRM
uses to determine weekly heating and cooling demand. Heating and cooling degree
days are calculated by using the average temperature for the day, the high + low, and
subtracting the average or mean temperature from the number 65 for heating degree
days or subtracting 65 from the average for cooling degree days. The number 65 is
used as the base number because most buildings and homes would be most
comfortable and energy efficient at or around 65 degrees.
Example: On a summer day the high was 90 and the low 70. The average is 80. 80
(average) - 65 (base) = 15 cooling degree days. It reflects how much power people
should be using on the average to cool, in this case their homes/businesses. Take
those daily cooling degree days and you can have daily/monthly or annual averages.
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NOAA HDD's
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NOAA CDD's
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The AccuWeather Hurricane Center remains one of our top "free" picks for
individuals looking for active commentary during the hurricane season. Caprock
Risk Management uses this tool as well as having access to paid private services
and direct access to meteorologists. Hurricane season officially starts June 1st each
year but the majority of hurricanes occur between Aug 15th to the end of September,
or peak hurricane season.
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Hurricane Central
Click Here
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