DIESEL PRICES CONTINUE UPWARD — AND THE US IS NOW ONE HURRICANE AWAY FROM RUNNING OUT OF DIESEL: Diesel prices smashed another record Friday, with prices hitting $5.58 a gallon. With NOAA predicting an above-normal hurricane season, it’s not good news for crop production or transportation close to the Gulf Coast or for already short diesel supplies. The start to the hurricane season is underway. As of Friday, more than 10 million people in southern Florida, Cuba and the Bahamas were under a tropical storm warning for the weekend. If the tropical storm would track farther west, it could spell trouble for diesel supplies as experts say the U.S. is one hurricane away from a shortage this year. “We're probably one Category 3 storm away [from a shortage], and that Category 3 storm would have to take aim for an area roughly from the Mississippi river to Houston,” says Patrick De Haan, head of petroleum analysis, GasBuddy. “That's the really sensitive area. Not only could it affect refining, but it could affect offshore oil production.“ One of the issues is refineries hit by Hurricane Ida last fall that never came back online. That major hurricane, and the devastation it caused, was one of the initial dominoes to fall for diesel prices. It will take approximately 2 years for prices to drop and fuel supply normalized.
BIDEN ADMIN INVOKES DEFENSE PRODUCTION ACT FOR CLIMATE CHANGE: In an effort to slow soaring energy costs brought on by Russian president Vladimir Putin and climate change, U.S. President Biden invoked the Defense Production Act (DPA) to prioritize green energy sources as part of a domestic manufacturing push. The administration is targeting solar production capacity and electric fuel cell manufacturing as well as transformers and electric grid components, heat pumps, and insulation. Invoking the DPA allows President Biden to take what the White House sees as action on rising fuel and energy costs in America while addressing critical climate change funding. The administration is betting on green energy programs to reduce the use of fossil fuels and create more resilient domestic supply chains.
U.S. NATURAL GAS PRICES HIT 14-YEAR HIGH: U.S. natural gas prices hit a 14-year high this week at $9 per million British Thermal Unit (MMBtu). The increase represents almost triple the $3.5 per MMBtu in 2021. The rising price for natural gas is a result of tighter energy availability due to disrupted Russian exports and diverted U.S. supplies. While in the U.S. the price of natural gas is rising, it still remains widely available, whereas, in Europe, there are definitive supply crunches that result in higher prices and temporary shortages. As long as the Western sanctions regime remains in place on Russia, the price of natural gas will continue to be higher than normal. Americans can expect worsening supply chain disruptions if the Biden administration continues to cancel natural gas leases on federal land.
ELECTRICITY DEMAND HITS ALL TIME HIGH IN TEXAS, MIDWEST PREPARES FOR ROLLING BLACKOUTS: The Electric Reliability Council of Texas (ERCOT) indicates that this week’s triple digit heat wave will push electrical demand to all time record highs in the region. ERCOT’s Announcement comes days after the U.S. Energy Information Administration warned that the Midwest could face rolling blackouts this summer due to overstressed power grids. ERCOT has stated it has enough resources to cover this summer’s predicted increase in demand, citing new additions of solar and wind power stations in the last year. However, experts note that aging power infrastructure may not have the capacity to move electricity to consumers after it’s been generated. Power analysts pay close attention to Texas as the state operates its own power grid amid heavy demands, making it a useful predictive benchmark. ERCOT has faced increased public scrutiny after it requested customers to conserve power as a miniature heatwave in May knocked six power plants offline. Increasing costs and blackouts are likely to plague consumers this summer as widespread extreme heat and drought overstress power grids and production capabilities.
