The Price for Heat Hits Highs
In today’s post, we take a look at the skyrocketing costs of heat and what is behind the increase.
For our readers in the Midwest, I’m guessing the only thing you’ve heard about the last 24 hours is the winter storm sweeping across the region. This is for good reason as it’s predicted to be historically cold. Already, we are seeing airlines cancel flights, travel plans rearranged, and now ethanol production getting cut back. That’s right, not only is the winter storm bringing logistic challenges, but we are seeing the cost of heat significantly increase.
Prior to the storm’s arrival, heating costs were expected to increase this winter. According to CNN, the projected cost to heat your home is 35.7% higher than last winter. Depending on the type of energy used to heat your home this could also influence the costs. Those whose homes use natural gas can expect to spend an average of 25% more this winter and those whose homes rely on heating are expected to spend more than 45%. Other sources of energy including electricity and propane will see an increase of 11% and 1% [1].
This is all to say - many households across the United States are likely to spend more on energy in the winter of 2022–23 compared with recent winters (according to the EIA [2]).
Source: IEA
What’s Causing the Rise?
To answer the main question as to why heating is skyrocketing, let’s look at the macro environment over the past couple of months. When Russia invaded Ukraine this resulted in not only a global energy shock but supply chain implications as well. The price for energy became volatile, supply shortages further intensified skyrocketing prices, and energy policies had to adjust to prioritize long-term energy security. The disruption led to historic increases in the prices of oil, gas, and other fossil fuels. We also saw supply chains suffer as infrastructure was destroyed, food security became a fear and access to commodities such as grains like wheat and corn was weaponized. As commodity prices increased, levels of inflation across the globe also increased. It’s important to note, that none of the crisis exists separately and they all contributed to one another [3].
Here in the U.S., we are feeling these consequences. Costs are rising due to higher fuel prices and increased demand due to colder weather. Additionally, with Russia being one of the leading countries in natural gas exports, this further created a supply and demand gap. Another contributing factor to supply issues, the US, along with other countries, imposed sanctions on Russian natural gas and crude imports. While there is debate about whether Russian refined products are still making their way into the US economy, this further added to the energy crisis we were experiencing in the US.
Also contributing to the cascading list of issues impacting the price is some US ethanol producers are cutting back on production. This is again due to soaring natural gas prices. When combined with the frigid temperature. facilities are unable to operate in cold conditions. If ethanol production is halted or decreased, this could potentially contribute to the squeeze on the gas supply. Looking back at what history has taught us, in February 2021, biofuel plants were among the first signs of a gas crunch which contributed to Texas energy bills soaring [4]. Ethanol plants scattered throughout Wisconsin, Iowa, Nebraska, and the Dakotas are also being affected by the freezing temperatures. Looking just at North Dakota – oil output has been cut by 200,000 to 250,000 barrels per day, or 18% to 22%, state Pipeline Authority Director Justin Kringstad estimated on Friday [5].
Sustainability Mover & Shaker
This week our Sustainability Mover & Shaker is Econic. According to Econic’s website, they have developed technology that significantly reduces the energy required to turn CO2 into polymers which can be used to create everyday plastics. Typically, large amounts of energy are needed in the form of heat or electricity to transform CO2 into chemicals. This process allows for traditional waste CO2 to be something useful to use. As stated on their website, the economic and environmental potential could be groundbreaking. They predict that a 30% market adopted by 2026 would mean that 3.5M tons /fewer CO2 emissions could be avoided which is the same as 2M cars off the road, more CO2 could be deployed into everyday objects avoiding further emissions, and this process would result in a reduced reliance on fossil fuels [6].
Source: Econic
Hot Tea
The holidays are upon us and while we may take time to travel and enjoy time off you might have missed some headlines throughout the week. Here’s the hot tea from this week in case you missed it!
Canada to Require 100% of New Cars Sold to be Zero Emission Vehicles by 2035
JPMorgan Sets 2030 Emissions Targets for Polluting Industries
Dutch pension giant ABP set to sell laggards as sharpens climate focus
World Bank to lend $500 million to help Brazil meet climate goals
Sources
[1] https://www.cnn.com/2022/12/22/business/heating-expenses-winter-storm/index.html
[2] https://www.eia.gov/outlooks/steo/report/winterfuels.php
[3] https://www.weforum.org/agenda/2022/11/russia-ukraine-invasion-global-energy-crisis/
[4] https://www.bnef.com/login?r=%2Fnews%2F1109261%3Fe%3DNews
[6] https://econic-technologies.com/