It's official: We are living inside the plot of The Day After Tomorrow. Now, a similar phenomenon is chilling the U.S. to temperatures not seen in a quarter-century, but this time, it isn't a Hollywood creation.
What is the 'polar vortex'?
Cue the dramatic music. In case you haven't heard (or stepped outside), a weather system known as a polar vortex is sweeping through the country. In the Midwest, some areas are as cold as -60°F with wind chill. According to scientists at NASA, the polar vortex is an air cycle that typically stays in the North Pole. At the moment, however, it has strayed more than 2,000 miles south. This isn't the first time such an event has happened, but it is rare.
With that in mind, there are a few obvious winners and losers from the event. Let's take a look at three of each.
Auto repair companies
An immediate winner from the polar vortex is any business involved in auto repair. Although regional, up-to-date statistics aren't exactly plentiful, Iowa City is one area noticing a change in recent weeks. Auto repair shops in the area are seeing two to three times the normal level of bookings, via a report from The Daily Iowan.
The colder the weather, the slicker the roads, the worse the driving conditions, the more frequent the accidents, the greater need for auto repair companies.
Winter apparel providers
This is a no-brainer -- winter apparel providers are always a big winner when it's cold outside.
According to Crain's New York, sales in the Northeast have boomed in recent weeks. Compared to a relatively warm holiday season in 2012-13, companies that provide coats, boots, hats, and other accessories are doing much better this year.
Crain's reports that Nordstrom (NYSE: JWN) has sold out of many winter items, and fellow Fool Eileen Rojas noted last month that demand is also likely "heating up" at places like Columbia Sportswear (NASDAQ: COLM) and V.F. Corp (NYSE: VFC), owner of The North Face brand.
Natural gas utility companies
This one makes sense as well, assuming natural gas providers hike rates over the long term. The recent cold spell has worked wonders for gas prices, pushing them to an all-time high on the Eastern seaboard. The fuel now costs $90 per million BTUs in New Jersey, nearly seven times last week's rate, and twice normal highs for this season.
In the Northeast, National Fuel Gas (NYSE: NFG), Consolidated Edison (NYSE: ED), and Northeast Utilities (NYSE: NU) should benefit from a demand boost. All three serve close to 4 million customers in this region.
I'd also expect Midwestern providers like AGL Resources (NYSE: GAS) subsidiary Nicor, and Integrys Energy (NYSE: TEG) to gain from the wintry weather. Both provide natural gas to nearly 7 million people in Illinois, Wisconsin, Michigan, and Minnesota.
Natural gas consumers
With that being said, it's a two-way street. Higher natural gas prices can hurt consumers' wallets. In most cases, there's usually a three to six-month delay between the period when prices rise and energy bills go up.
If natural gas remains elevated for the long term, there's greater chance of a rate hike. An analyst for Bentek Energy recently told The Wall Street Journal that it all comes down to one variable: Whether or not "we leave winter with below-average storage inventories." If inventories are depleted, natural gas companies will be forced to resupply at higher prices before passing the costs onto the consumer.
On Sunday, it was reported that 9,000 U.S. flights had been canceled since the start of this
year. Add in 3,600 more cancellations on Monday via FlightAware.com, and we may be on the edge of record territory. Consider this: The 2010-2011 winter season was one of the most expensive ever in terms of cancellations, costing domestic airliners over $600 million. At that time, AirlineForecasts LLC estimated that each missed flight cost about $7,000 in "lost fare revenue plus fuel and labor savings."
By this estimate, airlines have already realized $88 million in cancellation-related losses in the first week of 2014. Bloomberg says carriers like United Continental (NYSE: UAL), JetBlue Airways (NASDAQ: JBLU), and Southwest Airlines (NYSE: LUV) are facing the brunt of the problems due to cancelled flights at Chicago's Midway and O'Hare airports.
Seasonal data from the Bureau of Transportation Statistics isn't available yet, but if cancellations maintain this pace, total losses could top $450 million in January alone.
Electricity providers are having issues too. In the past week, it's estimated that customers in at least 17 states have lost power at some point.
The combination of extreme cold and ice can cause tree branches to break power lines. According to the White House, this type of incident, in addition to other natural disasters, costs between $18 billion and $33 billion a year. The federal government projects these costs to "rise as climate change increases the frequency and intensity of...extreme weather events," so they're not going away any time soon.
In 2014, companies like Consolidated Edison, Duke Energy (NYSE: DUK) and EPCOR Utilities are just a few that have reported outages related to the cold weather.
Meteorologists expect the weather system to leave the country by Friday, but there's no guarantee it won't return before winter is through. NOAA has said before that such events could become more common as the Arctic continues to warm, but more study is needed. It's quite possible that by causing sea ice to melt with greater regularity, rising temperatures in the North Pole can lead to a polar vortex that is more volatile. This is a sentiment shared by many leading scientists, and should be watched closely.
On the business front, places like auto repair companies, winter apparel providers, and natural gas utilities inherently benefit from colder weather, but others lose. This time, consumers will ultimately lose if natural gas inventories are depleted, and airliners are already feeling the pain. Don't forget about electricity providers, and it may be wise to buy a backup generator if you're worried about losing power.
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