Warm Winter Causes Big Losses

Due to unseasonably warm weather this winter, demand for utilities dropped significantly. The U.S. central bank forecasted an increase in the production index of 0.8 percent; however, the production index dropped 0.3 percent in the month of December. Many officials are citing climate change as the cause of this drop in demand, while some say it is just an abnormally warm winter. Utility companies depended on an increase in demand in December, but in January it just got worse. In January there was a 5.7 percent drop in utility demand, sparking widespread rumors about climate change, and causing the U.S.’s overall industrial output to fall by 0.3 percent.

Average temperatures this month were over 6 degrees higher than last year’s recorded averages, leading to a significant drop in demand for heating utilities. Utility companies are taking big losses because of this, with come recorded losses approaching 10 percent. And the worst is yet to come. Utility companies rely on the increase in demand during winter months. However this year that increase was absent. Now utility companies will have a smaller chance of posting gains this year.

It’s crazy to see the effect the weather can have on our economy. Just because temperatures were, on average, higher this winter, demand of a major commodity in the U.S. has significantly decreased. Outside factors play significant roles on demand in the U.S. economy. Even the temperature can cause significant gains or losses. Utility companies rely on this increase in demand during the winter, so the absence of the increase will cause significant losses. Utility companies will have to make up these losses during the rest of the fiscal year, a challenging task to complete. Overall, many utility companies took a big hit this winter, and may have to get financial help in order to stay in business, as a 5.7 percent drop in one month is concerning.