Hurricane Sandy may cost the US economy anywhere from $30 billion to $50 billion, according to preliminary assessments. A big portion of that bill will be paid by utilities as they scramble to repair downed lines and restore power to millions of customers.
And that means higher utility bills down the road for those customers, if previous hurricanes are any indication.
Utilities say they won't know the exact numbers for weeks, but Allan Drury, a spokesman for New York-based Consolidated Edison, expects the cost to utilities to be high. "[T]he empirical evidence would point to it being very expensive, because so many customers are out of service."
As of 1:30 pm Tuesday, about 860,000 Consolidated Edison customers were without power, Mr. Drury said in a telephone interview, more than four times the number of homes and businesses who lost power during last summer's hurricane Irene.
Between the added labor needed to restore power and the complicated repairs to damaged infrastructure, costs will add up quickly.
"We have outside contractor crews – and bills that will have to come in – that all becomes a part of the cost of storm restoration," David Graves, a spokesperson for National Grid, said in a voice message. "It’s going to be some time before we have all the accounting in place."
So who pays for all the overtime labor, downed wires, and blown transformers?
Ratepayers typically cover the costs associated with storms, Drury said, but the effect isn't always direct. "We don’t say, 'Here’s a storm, we now have to charge more.' "
Con Ed's utility rates are set on a one- or three-year basis by the New York State Public Service Commission. A spokesperson for New York's Public Service Commission did not return a call for comment Tuesday afternoon.
If hurricane Sandy is anything like hurricane Irene, customers in the areas hardest hit may see a jump in utility rates.
In southern Vermont, for example, where Irene did its most damage, Central Vermont Public Service Corp. customers who use an average of 600 kilowatt-hours a month are to pay a $2.23 monthly surcharge over four years to recoup the hurricane costs.
Public Service of New Hampshire customers will pay 12 cents a month over four years for the utility to recover $7.1 million in Irene damages.
Last week, Atlantic City Electric announced it received permission from the New Jersey Board of Public Utilities to increase rates increase by $3.44 or 1.9 percent for a typical residential customer. The company attributes the hike to the rising cost of infrastructure maintenance and restoration costs associated with hurricane Irene.
– Material from the Associated Press was used in this report.
As Hurricane Sandy bears down on the East Coast, a lot of prognosticators are offering up predictions for what it means for gasoline prices in that market. I thought it might be of interest to note the differences in Hurricane Sandy and Hurricane Katrina concerning the oil and gas markets.
Hurricane Sandy has already reduced refining capacity in the Northeast, and the possibility exists of extended outages if any of these refineries take significant damage from the hurricane. Gasoline and heating oil inventories in the area were already very low, and this increases the chances of sharp gasoline spikes across the area. However, these spikes are expected to be short-lived and localized, as the area also receives gasoline from Europe and from the Colonial Pipeline, which brings supplies to the East Coast from the Gulf Coast. As long as refinery outages are not prolonged, the gasoline markets should return to normally fairly quickly. However, people would be wise to make sure their cars are topped off with gasoline and that their heating oil supplies are adequate. ( Continue… )
Falling gas prices around the country have motorists breathing a sigh of relief, but a Mitt Romney campaign that has used rising fuel costs as a weapon during the lead-up to the presidential election may not be so happy to see pump prices dropping.
After relatively small drops over the first half of October, residents of some states are seeing prices as low as $3.20 per gallon, a major decrease from the $3.84 many drivers were paying only a few short weeks ago. While acknowledging that the cost of fuel is difficult to predict over the long-term, analysts remain optimistic that prices will continue to fall, potentially as low as a national average of only $3 per gallon, a rate not seen since 2010.
“Definitely gas prices are already falling and they’re going to continue to fall through the end of the year,” Oil Price Information Service analyst Ben Brockwell said. “The US average which was $3.80 just a few weeks ago is on track to go to below $3.50 here shortly.” ( Continue… )
It will not be the first time – nor will it be the last time – a major storm knocks out power for millions. High winds, broken tree limbs, and lightning strikes are a familiar foe to exposed, elevated cables.
The question arises: Why aren't power lines underground?
Some already are. San Diego has been putting utility cables underground since 1970 and hopes to bury all residential-area lines within the next half century. In 2003, the California Public Utilities Commission approved an "undergrounding" surcharge on San Diego residents' electricity bills. The city buries 20-25 miles of utility lines each year at an annual price tag of $54 million, according to its Utilities Undergrounding Program website. ( Continue… )
Last week's energy news included a piece from the Associated Press with a headline reading: "U.S. poised to become world's top oil producer; may soon overtake Saudi Arabia." If the reporter had actually examined figures available from the U.S. Energy Information Administration (EIA) website carefully instead of simply parroting oil industry sycophants, he would have ended up with a headline more like this: "Marginal gains in U.S. oil production mean continuing high prices and imports for Americans."
As it turns out, U.S. crude oil production is averaging 6.2 million barrels per day (mbpd) so far this year compared to Saudi Arabia's 9.9 mbpd. So, how did the reporter and his sources end up with a production number of 10.9 mbpd for the United States? ( Continue… )
While most hurricanes and tropical storms that make landfall in the United States have an effect on gas prices that consumers are unhappy with, the projected path of Hurricane Sandy and its causing of decreased fuel demand could actually help to continue to push gas prices lower around the country.
The entire northeastern part of the nation is currently locked down as nearly 70 million people brace for Hurricane Sandy, a complicated system that is growing ever larger as it merges with existing wintry cold fronts. This has included a temporary stoppage of transit services in New York City and a mandatory evacuation order of hundreds of thousands of coastal residents across several states. ( Continue… )
The anticipation surrounding hurricane Sandy is quickly swelling to proportions on a scale with, well, Frankenstorm.
As the storm nears, many may consider investing in a backup generator, as weather analysts forecast prolonged, widespread power outages.
The run on backup power sources has already begun.
As of Friday afternoon, generators made up eight of the 10 items in the home and kitchen category of Amazon.com's Movers and Shakers List – a ranking of the online retailer's best selling items over the past 24 hours. The DuroMax Elite MX1500 Gas Powered Portable Generator jumped from 13,478 to 78 on the site's overall best selling items, a 17,179 percent increase. ( Continue… )
The feeling of relief is palpable on Twitter:
" Lovin these gas prices!!"
"Gas prices just keep getting lower and lower! Yesss!"
" I can't remember the last time gas prices were this low."
This past week, gas prices fell 12 cents, the largest weekly decline since 2008, according to the AAA Fuel Gauge Report.
This week, gas prices are falling even more – down 9 cents since Monday, putting the national average for a gallon of regular unleaded at $3.58.
Hurricane Sandy could change that, at least temporarily on the East Coast, if as forecasted it slams into Delaware and disrupts refinery operations in the region. Gasoline futures were up two cents a gallon late Friday morning on that possibility.
For now, though, the trend at the pump continues down as supplies are high and demand subdued. Some 6 percent of gas stations are selling gas below $3.25 a gallon, according to GasBuddy.com, a group of local websites that track gasoline prices. Some 23 percent of stations are selling gas for less than they did a year ago, especially in the Great Lakes states.
Even if Hurricane Sandy stalls East Coast refinery operations for a few days, the overall trend for the rest of the year looks likely to continue downward. Despite stronger than expected growth in the third quarter, US benchmark oil prices had fallen below $86 a barrel in late morning trading.
"AAA expects that gas prices across the country will continue to drop leading up to Election Day and will move even lower approaching the end of the year, barring any unforeseen forces," the coalition of motor clubs said Monday in its weekly report.
We seem to hear two versions of the story of limited oil supply:
1. The economists’ view, saying that the issue is a simple problem of supply and demand. Substitution, higher prices, demand destruction, greater efficiency, and increased production of oil at higher prices will save the day.
2. A version of Hubbert’s peak oil theory, saying that world oil production will rise and at some point reach a plateau and begin to decline, because of geological depletion. The common belief is that the rate of decline will be determined by geological considerations, and will roughly match the rate at which production increased.
In my view, neither of these views is correct. My view is a third view:
3. An adequate supply of cheap ($20 or $30 barrel) oil is no longer available, because most of the “easy to extract” oil is gone. The cost of extracting oil keeps rising, but the ability of oil-importing economies to pay for this oil does not. There are no good low-cost substitutes for oil, so substitution is very limited and will continue to be very limited. The big oil-importing economies are already finding themselves in poor financial condition, as higher oil prices lead to cutbacks in discretionary spending and layoffs in discretionary industries. ( Continue… )
”…this is also a year of food deficit, in which we will consume (31 million tons) more grain than farmers produced. If 2013′s harvest does not establish a new world record, the poor are in serious trouble.”
His main point is that thanks to a growing demand for food driven by an increasing population and improving standards of living, along with the conversion of grains into fuel, the world has to break harvest records every year to keep up. Thanks to grain reserves, humanity can weather years that don’t break records, but failing to break records for two or three years in a row means hunger for hundreds of millions because the price of food will spike as speculators capitalize on the fact that low supply relative to demand equates to higher prices. If weather extremes become more and more common, the odds of running out of reserves becomes more and more likely. (See more: Midwestern Drought, Ethanol, & Renewable Fuel Standard) ( Continue… )