If you’re reading this, it means you’ve got access to power and internet. Count yourself among the fortunate today. Rolling blackouts and brownouts across the middle of the country and in Texas, have disrupted businesses and lives. It’s been particularly brutal in the Lone Star State. Electricity and natural gas are commodities that are so basic to our way of living that it’s easy to take for granted the efforts designed to make them reliable, available, and affordable. But, boy, does it make things difficult when they don’t show up as anticipated. In today’s blog, we discuss the factors behind the supply disruptions that are wreaking havoc in these commodity markets.
In Monday’s blog, 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. The exorbitant price premiums prompted non-essential gas demand to shut off, including LNG feedgas deliveries. [As noted in our LNG Voyager report, Texas Governor Greg Abbott reportedly asked the Freeport LNG terminal to reduce its feedgas intake. Pipeline flow data as of yesterday indicated both Freeport and Cheniere Energy’s Corpus Christi facility were already receiving less gas than usual. Cameron and Cheniere’s Sabine Pass facility in Louisiana also were seeing declines as weather conditions have been disrupting pipeline flows and terminal and marine operations. Piloting services have been intermittent all along the Gulf Coast due to fog and the hard freeze.] The chaos spilled over into trading on ICE Tuesday morning, when regular trading resumed for next-day gas and cash trades left Friday’s record prices in the dust — cash trading opened just under $1,000/MMBtu at some Midcontinent pricing locations and the NGI index for Oklahoma Gas Transmission (OGT) posted at $945/MMBtu. Prices were so out of whack that the Intercontinental Exchange (ICE) trading platform had to increase the maximum allowable price at some U.S. physical gas trading hubs, which just speaks to the level of pandemonium still gripping the physical gas market.
Just how unusual is Winter Storm Uri? Exhibit A: the photo below of a cross-country skier gliding through a residential area in Austin, TX, yesterday.
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About the song
"Terminal Frost" was written by David Gilmour. The instrumental is the fourth song on side two of Pink Floyd's 13th studio album, A Momentary Lapse of Reason. It was released as the B-side of the single "Learning to Fly" in September 1987. "Learning to Fly" went to #1 on the Billboard Album Rock Tracks chart, and #70 on the Billboard Hot 100 Singles chart. Personnel on "Terminal Frost" were: David Gilmour (guitar), Nick Mason (drum machine, toms, sound effects), Tony Levin (bass), Richard Wright, Jon Carin, Bob Ezrin (keyboards), and Ken Scott and John Helliwell (sax).
A Momentary Lapse of Reason was recorded between November 1986 and March 1987 at the Astoria, Mayfair, Britannia Row, and Audio International studios in London, and at the A&M, Village Recorders, and Can Am studios in Los Angeles. The record was produced by Bob Ezrin and David Gilmour and was released in September 1987. It went to #3 on the Billboard Top 200 Albums chart and has been certified 4X Platinum by the Recording Industry Association of America.
Pink Floyd was an English rock band formed in London in 1965 by Syd Barrett, Roger Waters, Nick Mason, and Richard Wright. Guitarist David Gilmour joined the band in late 1967. Barrett left the band in 1968, followed by Wright in 1979, and Waters in 1985; Wright rejoined in 1987. Pink Floyd officially broke up in 2014. The band has released 15 studio albums, three live albums, nine compilation albums, six EPs, and 27 singles. They are members of the Rock and Roll Hall of Fame and the UK Music Hall of Fame. Pink Floyd's albums The Dark Side of the Moon and The Wall are among the best-selling albums of all time, and both LPs are in the Grammy Hall of Fame. David Gilmour, Roger Waters, and Nick Mason still record and occasionally tour as solo artists. Syd Barrett died in 2006, and Richard Wright in 2008.
Comments
Today's blog was very good. If you are planning more on this topic, it would be interesting to have some insight into the problems at electrical generating facilities. An ERCOT press release stated that:
"Since the winter storm began on Monday, approximately 185 generating units have tripped offline for one reason or another. Some factors include frozen wind turbines, limited gas supplies, low gas pressure and frozen instrumentation."
This seems like a situation with lots of feedback loops along the lines of the ones that Sheetal discussed today. Thanks again for the insight.