Relations between Temperature and Residential Natural Gas Consumption in the Central and Eastern United States

Abstract

The increased U.S. natural gas price volatility since the mid-to-late-1980s deregulation generally is attributed to the deregulated market being more sensitive to temperature-related residential demand. This study therefore quantifies relations between winter (November?February; December?February) temperature and residential gas consumption for the United States east of the Rocky Mountains for 1989?2000, by region and on monthly and seasonal time scales. State-level monthly gas consumption data are aggregated for nine multistate subregions of three Petroleum Administration for Defense Districts of the U.S. Department of Energy. Two temperature indices [days below percentile (DBP) and heating degree-days (HDD)] are developed using the Richman?Lamb fine-resolution (?1° latitude?longitude) set of daily maximum and minimum temperatures for 1949?2000. Temperature parameters/values that maximize DBP/HDD correlations with gas consumption are identified. Maximum DBP and HDD correlations with gas consumption consistently are largest in the Great Lakes?Ohio Valley region on both monthly (from +0.89 to +0.91) and seasonal (from +0.93 to +0.97) time scales, for which they are based on daily maximum temperature. Such correlations are markedly lower on both time scales (from +0.62 to +0.80) in New England, where gas is less important than heating oil, and on the monthly scale (from +0.55 to +0.75) across the South because of low January correlations. For the South, maximum correlations are for daily DBP and HDD indices based on mean or minimum temperature. The percentiles having the highest DBP index correlations with gas consumption are slightly higher for northern regions than across the South. This is because lower (higher) relative (absolute) temperature thresholds are reached in warmer regions before home heating occurs. However, these optimum percentiles for all regions are bordered broadly by surrounding percentiles for which the correlations are almost as high as the maximum. This consistency establishes the robustness of the temperature?gas consumption relations obtained. The reference temperatures giving the highest HDD correlations with gas consumption are lower for the colder northern regions than farther south where the temperature range is truncated. However, all HDD reference temperatures greater than +10°C (+15°C) yield similar such correlations for northern (southern) regions, further confirming the robustness of the findings. This robustness, coupled with the very high correlation magnitudes obtained, suggests that potentially strong gas consumption predictability would follow from accurate seasonal temperature forecasts.