Extreme cold weather, frozen natural gas pipelines and wind turbine blades, wholesale electricity prices on the grid soaring more than 100-fold, refineries shutting down, millions of households forced to rotate power outages ……
It’s a sight the U.S. energy market has never seen.
What’s happening?
Since the first weekend of February, a cold wave from the Arctic has brought unprecedented cold weather to much of the United States.
As of Feb. 9, hundreds of cities in the central U.S., from Denver to Chicago, were experiencing record low daily temperatures.
Texas is currently being severely impacted by the winter storm, with temperatures below 0 degrees Celsius across the state.
Among them, the southern Brownsville (Brownsville) temperature is -3.9 degrees Celsius, while the Panhandle (Panhandle) temperature is as low as -26 degrees Celsius.
Much of eastern Texas, including Dallas, San Antonio, Austin, Houston, Corpus Christi and Brownsville, remains under the influence of the winter storm.
Travel conditions in the aforementioned areas are very hazardous or have reached a state where travel is nearly impossible.
The cold snap comes as prices for various heating fuels, including oil and natural gas, soar, as do electricity prices and usage, and millions of U.S. households face rotating power outages for the first Time in a decade.
Electricity: soaring demand, short supply, forced, rotating blackouts
Extreme cold weather is arriving and wind turbine blades are freezing. But wind power accounts for nearly a quarter of Texas’ electricity supply, and more than half of its capacity has now been cut off.
This, coupled with a general shortage of natural gas supplies to power plants, has left the Texas grid unable to keep up with the sudden increase in demand for electricity.
Texas grid operators estimate that more than 34 gigawatts of generating capacity has been “destroyed” by the cold snap, which equates to 40 percent of the state’s projected electricity supply for the summer of 2020.
Both the operators and Southwestern Electric Power Company are currently implementing rolling blackouts, which are rotating power outages ranging from 15 minutes to an hour, to protect the grid from total collapse.
It is worth noting that in the past three decades, Texas has only taken such extreme measures four times.
The grid operator said in a release Monday (Feb. 15) that the outage is expected to last until early Tuesday EST.
Meanwhile, wholesale electricity prices on the Texas grid spiked more than 10,000 percent Monday due to severe winter weather and rotating outages by power producers.
The real-time wholesale market price on the grid operated by the Electric Reliability Council of Texas (ERCOT) has climbed to $9,000 per megawatt, the highest price the market will allow. This compares to the usual price of less than $100 per megawatt for the grid that provides most of Texas’ electricity.
Natural Gas: Production Down, Prices Soaring
It’s not just electricity prices that have soared.
Demand for natural gas is particularly strong in the central U.S., especially in Oklahoma, where demand for heating in homes and businesses has risen to record levels.
Natural gas prices in two central U.S. hubs rose to $500 per million British thermal units on Monday, some traders said. Before that, the region’s fuel usually traded for less than $3 per million British thermal units.
Natural gas production has fallen by more than 10 billion cubic feet per day in the past week, according to Bloomberg data.
Refining: Oil prices move higher as big plants say they’re shutting down
Electric and natural gas markets have been severely damaged, and Texas’ massive refining industry has also caused widespread concern in the market.
Currently, a number of refineries in Texas have announced their closure, affecting the capacity of about 3 million barrels per day.
Motiva Enterprises, the largest refiner in North America, said it will close its Port Arthur refinery in Texas due to severe cold weather.
Chevron Phillips Chemical Co. reported that it will prepare to shut down equipment due to severe cold weather at its Pasadena, Texas, plant. Enbridge also said the Line 59 Crude Oil pipeline is closed after a power outage. ExxonMobil closed its Beaumont, Texas refinery.
These plant closures portend tight supplies and higher prices for gasoline, propane and other fuels in cities across the U.S. that rely on Gulf Coast fuels in the coming days and weeks.
Considering that the outbreak has caused the crude oil industry to significantly reduce production, the impact on pipeline fuel supplies could spread beyond Texas if the crude oil disruption lasts longer than a few days.
As a result, oil prices surged to their highest level in about 13 months on Monday.
Brent crude futures rose $0.87, or 1.39 percent, to settle at $63.30 a barrel, after rising to $63.76 a barrel earlier in the session, the highest level since Jan. 22 of last year.
U.S. crude oil futures (WTI) rose $0.63, or 1.1%, to $60.10 a barrel, after touching $60.95 a barrel earlier in the session, the highest level since Jan. 8 last year.
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