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Snowless in Boston: Impact on MLPs

|Includes:CMLP, Global Partners LP (GLP), SPH

In stark contrast to last winter, which resulted in 6-ft high snow banks on either side of my driveway by the end of February and cabin fever rivaling that of "The Shining", the Boston area has yet to have any snowfall in November or December this year.   If you live in some other part of the country, you may have missed this, but the weather nationwide (and specifically in New England) has been very mild compared with last year.  At the risk of jinxing what has been a very pleasant few months with no snow shoveling or ice scraping, lets try to quantify just how mild it has been and what that means for MLPs.

(heeeeere's Johnny!)

According to heating degree days data I sifted through on the website of the National Weather Service (data found here), so far, the 2011 winter (loosely defined by me as starting at the beginning of November) has been the mildest on record since 2006.  Heating degree day (HDD) is a measurement designed to reflect the demand for energy needed to heat a home or business. It is derived from measurements of outside air temperature.

There have been 894 heating degree days nationally from the beginning of this year November through December 16, 10.5% less than the average of the previous 5 years over the same time period (999 HDDs), and 15.8% less than last year when there were 1062 HDDs.

The difference is even more pronounced in Massachusetts, where there have been 1035 HDDs thus far, 20.5% less than the 1302 HDD average the prior 5 years, and 23.1% less than the 1346 HDDs last year.  The West and Rocky Mountain regions of the country are colder than normal, but New England is far warmer than normal.  Just last week, according to the EIA, New England averaged 43.0 degrees, 8.1 degrees warmer than normal.

A milder winter means less demand for and consumption of heating oil, propane, natural gas and electricity.  That will likely mean further deterioration of operating results from the propane MLPs, at least in this current quarter.  It can mean lower demand on the margin for coal from utilities.  It can also be one more headwind facing natural gas prices....

Read the rest here

Stocks: GLP, SPH, CMLP