Wednesday, January 18, 2012

The Economics of a Warm Winter

While winter lovers and snow lovers have probably come close to pulling their hair out over the mild winter of 2011-12 thus far, there are some substantial fringe benefits because of it.

An article published by the AP over the weekend, discusses the ramifications of the very mild winter thus far (with the Dec-Jan period likely ending up as the warmest on record for the US...with reliable records to 1950).

What people don't always recognize about longer-term locked patterns like this is that they can prove to be major money savers. For instance, with the mild temperatures, you've more than likely noticed a year-on-year decrease in total energy costs. In fact an average energy bill has dropped 3% from last winter. With a glut of natural gas available due to both lack of use and increased production, the price of natural gas closed yesterday at $2.49 per million BTUs...and has been dropping steadily this month, thanks in part to the warm winter.

The energy benefits are probably the most obvious, but you also don't think of other things referenced in the article, such as airlines not having to de-ice planes as much (though something tells me we won't be seeing that reflected in the price of airfare!). In addition, delays and cancellations should be vastly improved this winter due to less wintry storminess. The article references United Airlines seeing a drop in cancellations last month from 29,000 in 2010 to a mere 7,000 in December 2011! Along the same lines, road crews are using far less rock salt to help clear roads and overtime costs are down.

Now, of course, with all the benefits, there are also some drawbacks. While most of us as consumers have no issues with this, some businesses are hurting this year because cold and flu cases are down a bit, so those medicines aren't flying off the shelves. The lack of snow means a lack of snow shovel/snow blower sales, as well as some pain for landscaping companies that run side businesses doing snow removal. There's also been a lack of winter clothing sales, which of course now means we can get lots of winter merchandise at rock bottom prices. So this may not be a bad time to restock the closet for perhaps later this winter (a big maybe) or perhaps the next few winters...because we all know sustained cold and snow won't stay away forever!