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Today in Energy

December 14, 2020

Petroleum stocks at Northeast power plants have not changed much in recent years

northeast region power plant petroleum liquid inventories
Source: U.S. Energy Information Administration, Power Plant Operations Report

In much of the United States, power plants that burn petroleum liquids are generally operated for short periods during times of peak electricity demand, such as during brief periods of cold winter weather. These plants maintain petroleum inventories so that they are ready to dispatch electricity when it’s needed. Petroleum plays an important role in the Northeast (defined here as New York and New England) when electricity demand is high, particularly in the winter. According to data from the U.S. Energy Information Administration (EIA), power plants in the Northeast held petroleum inventories of approximately 6.7 million barrels as of the end of September 2020, close to the average of 7 million barrels during the previous five Septembers.

In the winter in much of the United States, cold weather increases natural gas consumption for home heating, which reduces the availability of natural gas for electricity generation. This dynamic is more pronounced in the Northeast because of the region’s natural gas pipeline capacity constraints during peak demand periods and its lack of natural gas storage.

Petroleum inventories and petroleum-fired electricity generation are particularly important in the Northeast during periods of extreme winter weather, when natural gas supply is more constrained in the region. At these times, electricity producers turn to petroleum-fired generation to meet demand.

Northeast power plant petroleum liquid consumption and receipts
Source: U.S. Energy Information Administration, Power Plant Operations Report

At the beginning of 2015, a series of blizzards and winter storms increased the demand for petroleum-fired generation in the Northeast, which, in turn, triggered petroleum consumption at times of peak cold in January and February 2015. In January 2018, petroleum consumption increased again when a bomb cyclone winter storm hit the Northeast, bringing bitter cold weather that raised demand for petroleum-fired generation.

Power plants in the Northeast maintain consistent levels of petroleum inventories to ensure they can run when needed, which helps maintain grid reliability. Plants quickly replenish inventories after weather-induced uses of petroleum-fired generation. Petroleum receipts by power plants in the Northeast rose in the months following the winter storms in early 2015, totaling 2.7 million barrels between January and March 2015. Following the bomb cyclone storm in January 2018, petroleum receipts by plants in the region totaled 3.0 million barrels in January and February 2018.

Principal contributor: Paul McArdle