Risk glossary

 

El Niño

A periodic warming of the tropical Pacific Ocean that affects weather around the world. Typical consequences of El Niño include increased rainfall in the southern US and drought in the western Pacific. Winter temperatures in the north-central states of the US are typically warmer than normal in El Niño years and cooler than normal in the southeast and southwest of the country.

However, its effects outside the tropical Pacific are unpredictable and almost any definition would be disputed by meteorologists. The warmest and coldest winters in the northeast US since 1950 have both occurred during El Niño periods. The name of the phenomenon derives from the fact that it tends to appear around Christmas – El Niño means ‘little boy’ in Spanish, the name commonly given to the infant Christ.

A 1997/1998 El Niño winter gave a boost to the weather derivatives market by prompting energy companies to hedge against mild winter weather that would decrease energy demand.

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