The energy market is being hit with a perfect storm as extreme winter weather whacks the state of Texas and may linger for the next several days.
Price surges are roiling oil, natural gas, and electricity markets, all of which will likely trickle down to the U.S. consumer at some point.
“We are seeing in the Permian Basin about 15% or nearly 1 million barrels per day of crude oil production offline, but more importantly about 40%-50% of natural gas production has gotten frozen in and of course that natural gas is used for power generation and this happening at the same time the wind turbines in West Texas have been frozen,” Lipow Oil Associates President Andy Lipow told FOX Business. He also noted about 7% of the nation’s oil refineries are offline leading to higher gas prices.
|USO||UNITED STATES OIL FUND L.P.||42.30||-0.42||-0.98%|
West Texas Intermediate, the U.S. crude benchmark, jumped to more than $60 per barrel on Monday, the highest level in 12-months. Brent, the global benchmark, topped $63 per barrel and has gained over 22% this year.
|UNG||UNITED STATES NATURAL GAS FUND LP UNIT (POST REV SPLIT)||9.90||-0.14||-1.39%|
Spot Natural gas prices are expected to tick even higher after hitting record levels last week of $200-$300/BTUs, as temperatures dropped, according to S&P Global Platts.
As for electricity in the state, spot electricity prices in Texas’ West hub spiked above the grid’s $9,000 per megawatt-hour cap. Power typically costs $25 per megawatt-hour.
Bill Magness, CEO of the Electric Reliability Council of Texas (ERCOT), is instituting rolling outages across the state to conserve energy.
Gov. Greg Abbott, updating the public via Twitter, noted that some power producers were frozen as temperatures dipped into the teens in Dallas and the 20s in Houston as of Monday afternoon and are expected to drop further into the evening, according to forecasters.