There’s finally some good news for folks in Texas: it’s gradually getting warmer, and the power outages that left much of the Lone Star State in the cold and dark the past few days should keep winding down. But what are we all to make of what just happened? How could a state blessed with seemingly limitless energy resources of every type — natural gas, coal, wind, and solar among them — end up so short of electricity when it needed power more than ever? It turns out that the electric grid that the vast majority of Texans depend on day in, day out is designed to perform very well almost all the time, but is susceptible to a rapid unraveling when an unfortunate combination of events hit. Today, we continue our review of how this week’s extraordinarily low temperatures have been impacting energy markets — and many of us.
Over time, Texans have pretty much seen it all, weatherwise. Scary thunderstorms. Baseball-size hail. Hurricanes and their attendant flooding. Tornadoes too — plenty of them. Snow and ice storms aren’t out of the question either, nor are sub-freezing temperatures. But no one alive today has seen anything like what many of us have experienced the past few days. Worse yet, the polar vortex of February 2021 wasn’t a short-term thing — it’s lingered way too long, and it’s had profound effects both on energy markets and the people who have lived through it all.
This is our third blog on the deep freeze this week. First, in East Is East, West Is West, we discussed the mayhem that unfolded in the physical gas market in trading for the weekend (and in weekend trading) as a massive spike in demand and a supply contraction (both in terms of production and interregional flows) created localized supply shortages and resulted in record, triple-digit gas prices across the Midcontinent and West. Then, in Terminal Frost, we looked at how natural gas supply has taken a big hit as freezing temperatures and widespread power outages have led to extensive freeze-offs at the wellhead as well as other types of upstream and pipeline outages that have crippled producers’ ability to get volumes to market.
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