A record-breaking snowstorm in Texas, USA has become a global crisis! Initially, financial markets thought it was only a short-lived natural disaster, but now increasingly found that its impact is difficult to quickly resolve, but also disrupted the world’s energy, chips, automotive supply chain, foreshadowing a “super Inflation” may therefore be ready to kill, debt rates are the first to rise, dragging down the stock market adjustment, while provoking a heated debate on the development of new and old energy.
Global Energy Crisis
Several regions in the U.S. extremely cold and snowy weather, the most serious disaster in the shale oil town of Texas, more likely to evolve into a global energy crisis, the news stimulated Brent oil Thursday exceeded $ 65 per barrel, for the first Time since January last year; the central region of the United States natural gas spot prices, more than 100 times than last week’s explosion. The market is watching the sharp decline in U.S. oil supply, whether it will influence the Organization of the Petroleum Exporting Countries and allies (OPEC +) next month to relax the members of the decision to cut production quotas.
According to industry estimates, the loss of supply is now more than 4 million barrels per day, equivalent to about 40% of U.S. Crude Oil production, Citi previously expected to lose about 16 million barrels of production by early March, traders now estimate that the figure may increase nearly twice.
Indeed, traders and advisers initially expected the disruption to Texas oil supplies to last only two to three days, but now estimate that it will be difficult to recover until at least the weekend. Ben Luclock, head of oil trading at commodities trading giant Trafigura, noted that the market had underestimated the loss of oil production caused by the bad weather in Texas. Paul Horsnell, head of commodity research at Standard Chartered, further mentioned that while there is evidence that Texas shale oil production, in the past, recovered quickly after the severe cold weather, but the impact on refineries will take longer.
Wachovia Bank economist Howie Lee said the cold front is the perfect storm for the oil market, but not the only catalyst for oil prices to surge higher, there is also Saudi Arabia to support the oil market and a sharp drop in U.S. inventories.
OPEC+ will meet in early March, the Saudi energy minister warned in a forum on Wednesday that the outlook for the oil market is very uncertain, calling on other allies to remain cautious about further increases in production and referring to the lessons of last year’s plum market. However, there are reports that Saudi Arabia, which unilaterally announced an additional 1 million barrels of production cuts earlier, is considering returning production to normal in the coming months, but not before April, as it has previously made commitments to cut production in February and March.
In any case, the suspension of a large amount of U.S. crude oil production and refinery operations is starting to ripple through to the consumer level. U.S. national gasoline prices rose to $2.54 per gallon on Wednesday, up 28 cents from the beginning of the year, with market speculation that the future could surge up to the $3 level in 2014. Reportedly, New York is currently one of the most nervous gasoline inventory, the American Automobile Association (AAA) spokesman said the situation is similar to the Gulf of Mexico hurricanes.
In addition, the cold weather has hit Texas natural gas production hard, with normal daily production of about 23 billion cubic feet, or a quarter of the U.S. mainland, and the state’s two liquefied natural gas (LNG) export ports handling 4 billion cubic feet per day. Texas Governor Abbott announced emergency measures to restrict natural gas deliveries to other states until Feb. 21, and although he was accused of violating the Commerce Clause of the Constitution, he claimed that the disaster declaration issued earlier empowered the implementation of the restrictions.
According to Dynasty Power trader David Hoy, spot gas prices at Oklahoma’s natural gas hub rose from $999 per million British thermal units (BTUs) on Tuesday to $1,250 on Wednesday, a more than 100-fold spike from just $9 last week.
IHS Markit’s senior director of North American natural gas Charles Nevle expects U.S. natural gas production to return to previous levels only after March.
The world is more worried about the “core”]
As one of the major industrial towns, Texas is one of the states facing huge economic losses due to a rare cold snap. Because of the low temperature, the local power plant can not operate normally, resulting in large-scale power outages. Austin Energy has asked a number of local chip factories to completely suspend operations, the potential chip shortage is further exacerbated.
The latest report points out that the Austin power outage will affect the global supply of semiconductors, well-known major manufacturers Samsung, NXP Semiconductors and Skorpios Technologies are set up in the local plant, experts pointed out that the sudden power outage will have a significant impact on the wafer plant, the production of wafers may have to be scrapped.
Samsung’s foundry capacity in Austin is 100,000 pieces, accounting for 30% of the company’s 12-inch capacity, the giant Intel, Qualcomm are its main customers; NXP has two 8-inch fab, mainly involved in automotive microcontrollers (MCU), is one of the key automotive chips, estimated to hinder and global automotive MCU supply up to 15%; Infineon has a local 8-inch fab, the main production of automotive / industrial Infineon has a local 8-inch fab, which mainly produces automotive/industrial MCU and NOR Flash memory, affecting about 5% of the global supply. In short, up to 20% of the world’s automotive MCU material will be affected, which will aggravate the shortage of automotive chips and drive up the related prices, and the output of automakers will be further hit.
As the 8-inch wafer capacity is greatly affected, Asian suppliers will benefit from this, especially in the original shortage of goods, will have better bargaining power, including Taiwan‘s UMC, TSMC, as well as the mainland’s Hua Hong Semiconductor.
U.S. chip supply setback, may also further deepen the dependence on the Asian region. Foreign news reports, U.S. President Joe Biden‘s senior economic adviser Brian Deese (Brian Deese) and U.S. auto companies and suppliers held a meeting after a letter to the government of the Republic of China, seeking assistance to solve the problem of U.S. semiconductor shortage. In the letter, Deese thanked Taiwan’s Minister of Economic Affairs Wang Meihua for her personal commitment to the chip shortage issue and conveyed the concerns of U.S. auto companies about the “lack of cores.
Why is the “lack of cores” a big deal? All because once the plant shutdown, even a chip, behind the tens of millions of workers’ jobs and their families’ livelihood. However, analysts estimate that the shortage of automotive chips will last at least six months. Strategy Analytics Strategy Analytics Executive Director Neil Mawston said, the Epidemic chaos, the Sino-US dispute hoarding and the people at Home caused by a large number of demand, the formation of a perfect storm, any chip-related products will be affected, including cars, smart phones, game consoles and all kinds of computers, expected to supply throughout this year will be reduced or more expensive. As Samsung and TSMC is the world’s leading foundry, a snowstorm has hit Samsung production.
[Auto plant was forced to close down to resume the regular no date]
The United States suffered a blizzard, extreme weather led to a number of states in the economic activity came to a halt, the automotive industry supply chain is also not beaten by natural disasters. Ford (Ford), General Motors (GM) and other automakers have not been able to resolve the lack of “core” crisis, and now the snowstorm and the closure of a number of plants, the global automotive industry is really disaster-prone, I’m afraid it will take a longer time to return to normal.
Due to the shortage of upstream parts, Ford announced earlier this month that its best-selling vehicle in the United States, the F-150 farmer’s car to cut production. The snowstorm, forcing its F-150 assembly plant in Kansas City, temporary shutdown of more than a week, is expected to resume work on the 22nd of the same month. Ford said the decision is “to ensure that the company will minimize the use of natural gas, so as not to sacrifice the amount of heating for local residents.” The plant employs about 7,300 hourly-paid workers, who will receive about 75 percent of their usual wages during the shutdown.
GM also confirmed that it has suspended the first round of daily production operations at four plants in Texas, Tennessee and Kentucky, which were affected by the snowstorm. The company continued that it is studying whether to extend the shutdown period. These plants mainly produce Chevrolet’s best-selling vehicles such as the Silverado and Escalade.
In addition, Toyota’s plants in Texas, Kentucky, Indiana, Mississippi and Virginia will suspend the first round of daily operations; Nissan also closed a total of three plants in Tennessee and Mississippi.
In the case of global industrial integration, the shutdown of several automakers will affect the overall industrial supply chain. In addition to the U.S. snowstorm, Japan’s auto plants have previously been forced to reduce production because of the aftermath of the Fukushima earthquake, which can be described as adding insult to injury. It is worth noting that the current global shortage of automotive chips still continues, the snowstorm triggered by the shutdown of the chip factory, will further drag the supply of automotive chips, and then make the supply chain situation worse.
The natural disaster, human factors also hindered the operation of the automotive industry supply chain. Germany recently implemented stricter quarantine measures and immigration regulations at the border to prevent the introduction of a new variant of the coronavirus. However, this move also led to delays in the clearance of auto parts, affecting the entire local car factory.
The German Automobile Industry Association (VDA) pointed out that the testing and regulatory requirements have led to serious traffic congestion at the border, which is expected to soon impact the supply chain of auto plants and cause domestic plant production to come to a halt. Europe’s largest car factory Fushi Auto (Volkswagen) said that although the current situation has not yet caused serious impact on the factory, but the company’s current inventory can only be maintained for a period of time, if the situation worsens, do not rule out the impact on production.
BMW (BMW) said that its assembly plant is currently supply and operation as usual, stressing that it will watch the development of the situation and work closely with suppliers and logistics partners.
The global refinery has business opportunities energy development set off a heated debate]
The snowstorm triggered a major power outage in Texas, where millions of families faced the cold snap without electricity. Part of the reason for the blackout is due to wind power, photovoltaic and other new energy generation equipment in the snowstorm can not operate as usual. At the same time, a large number of U.S. refineries also stopped operating due to power outages, and global refineries also ushered in the supply gap brought about by export opportunities.
Refineries outside the U.S. have become the biggest beneficiaries of this disaster. FACTS Global Energy (FGE), a global energy consultancy, said in a report that many local refineries had to use emergency measures to stop operations quickly due to the impact of the natural disaster power outage, which means that the time needed to resume production may be much longer than normal.
FGE noted that while U.S. gasoline and diesel inventories are high enough to meet demand in the short term, the crisis also presents a potential arbitrage opportunity. Because the market is expected to increase local demand for diesel used for power generation, many traders have scrambled for tankers in order to bring large amounts of European diesel to the U.S. for sale.
According to foreign media estimates, the current U.S. refining industry to reduce the processing of 3 million barrels per day. Recently, Europe has at least 8 large tankers have been hired for transportation, the total size of the equivalent of 2.8 million barrels, I believe that most of the gasoline is shipped to the United States.
The supply gap is likely to drive up the price of U.S. refinery products and encourage refineries around the world to ship fossil fuels to the U.S. East Coast, but the specific situation depends on the resumption of work by U.S. domestic refiners.
As the snowstorm hits, the Electric Reliability Council of Texas (ERCOT), which is responsible for the Texas power supply network and accounts for 90% of the local electricity supply, said that about 2.7 million homes in the state are currently without power. Reformers in the United States have blamed new energy generation systems for the blackout, prompting a rethink of what is better or worse about the “fossil fuel to new energy” policy.
U.S. President Joe Biden has said that he wants to make the country “carbon neutral” by 2050. New energy has basically become a major trend to replace fossil fuels, but this snowstorm triggered a major power outage, revealing some of the flaws of the new energy generation system. Republican Texas Governor Abbott said the incident showed the need for fossil fuels, and he also took the opportunity to criticize green energy policies.
However, another report pointed out that wind power only accounts for 7% of the overall power generation in Texas, natural gas is the main source of electricity, and the ice outage, the biggest problem is the extreme low temperature caused by the freezing of natural gas pipelines, transport production halted due to.
While the global trend toward cleaner energy is certainly unchangeable, public opinion shows that the public still has doubts about the reliability of new energy sources, meaning that the bottom of fossil fuels will still be able to coexist with new energy sources for a long time to come. For traditional energy companies and oil giants, it also means that there is a longer time to lay out the transformation.
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