The Texas Energy Crisis Has Gone Global

February 18, 2021 12:30 PM
Texas has banned any natural gas supplies from leaving the state, which will cause problems in surrounding states and around the world
With almost 4 million barrels of U.S. oil production shut-in and refineries shutting down, it'll likely cause big drops in distillate and gasoline supply
Saudis signaled that they would reverse their 1 million barrel per day production cut in April
Energy Report

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The Phil Flynn Energy Report 

The Global Energy Crisis

The Texas energy crisis has gone global as short-sighted energy policies and green energy failures are causing a massive loss of oil and product supply, as well as natural gas. Texas is still the heart of the global energy world and when it takes a hit, the rest of the world feels it. Things are so bad that Texas has banned any natural gas supplies from leaving the state, which will cause problems in surrounding states and around the world. LNG exports from Texas will stop, which will have an impact on foreign spot markets. 

The heavily-subsidized wind energy in Texas has failed to bring down the grid and while some will tell you green energy is not to blame, we don’t believe them. We can’t have an energy grid based on how we think things should be versus one based on the reality of our situation. That lack of real vision and foresight may create a shock to the global economy unless they get things under control in Texas. 

The overreliance on less-reliable alternative energy sources like wind and solar could put the whole system at risk. We at The Energy Report also have hope that the Biden Administration learns from this crisis and backs off its anti-fossil fuel agenda, otherwise the rest of our country will be in the dark one day, too.

The ramifications will be felt at the gas pump, where prices were already rising weeks before this energy crisis. With almost 4 million barrels of U.S. oil production shut-in and refineries shutting down, it'll likely cause big drops in distillate and gasoline supply. 

Crude supplies have been falling for weeks as well, and last night the American Petroleum Institute (API) reported that U.S. Crude Supply fell by 5.8 million barrels last week. Distillate stocks fell by 3.5 million barrels, but gas stocks increased by 3.9 million barrels. Part of the crude draw was a major 3.0 million-barrel drop at the Cushing delivery hub.

Oil prices dipped after the Saudis signaled that they would reverse their 1 million barrel per day production cut in April. That’s actually good; the market will need that oil to offset the losses from U.S. oil output. I remember we used to poke fun at Iran because, despite the fact they sat on some of the most prolific oil reserves in the world, they failed to build a refinery and had gasoline and diesel shortages. I’m sure some people in the world are looking at the Texas energy mess and scratching their heads.

Though Texas is speeding this energy price spike up, it’s something that I warned was coming. Rash predictions about permanent demand destruction after Covid-19 and predictions of “peak oil demand” have us seriously underinvested not only in the short run, but in the long run, too. The rush towards the electrification of cars and other common products must be balanced with the fact that electricity doesn’t grow on trees. 

Believe me, the answers are not blowing in the wind. Wind turbines can’t be scaled up enough and are unreliable at times. Solar, of course, is also less reliable and there must be a massive improvement in the storage of solar energy to implement it on a larger scale.

They say we fought wars over oil. I’m afraid we might have to fight wars for “rare earth minerals” necessary for products like electric batteries. China, one of the world's biggest suppliers of rare earth minerals, has already signaled that they may hoard supply. Those that push for all-electric everything may want to take into account those types of risks. What part of rare earth minerals do we not get?

Mother nature needs to save us. Natural gas prices are now soaring, and propane cash prices are rocketing.

The risk for another upside spike is still high. We’re still in a “buy the breaks” mode. This type of situation is why we’ve been telling folks to be hedged.

Don’t miss out on my wildly popular trade levels on all major markets, as well as special subscriber-only updates. Call me at 888-264-5665 or email me at pflynn@pricegroup.com.

About the Author

Phil Flynn is a senior energy analyst at The PRICE Futures Group and a Fox Business Network contributor. Phil is one of the world's leading market analysts, providing individual investors, professional traders, and institutions with up-to-the-minute investment and risk management insight into global petroleum, gasoline, and energy markets.