Global Energy Shortage?

[ABMax24]

China is curtailing coal consumption of its power plants, 100 million in Northeast China are facing prolonged rolling blackouts, in India over half the coal power plants have less than a weeks supply of coal on hand, Europe has seen natural gas prices increase almost 500% in a year, oil and natural gas prices in North America are hitting multi-year highs, panic buying at fuel stations in the UK has caused fuel shortages.

Are we in for a period of energy scarcity? Could energy prices spike to unprecedented levels as has been seen in other commodities such as steel and lumber in the last year?

 

[peakbagger]

Its a Covid side effect like many other shortages. There are no doubt some actors that are also taking advantage of it to flex their muscles and pad their wallets.

I just read that the shale producers are rushing back into the fields as the prices are too high to resist. Probably a good time to have yrd full of used equipment and a rental fleet.

 

[stoveliker]

It's not 500% but 200% (for nat. gas).
And it's due to the economy getting back on its feet, a colder spring, and higher CO2 costs. (In North West Europe)

 

[ABMax24]

It's not 500% but 200% (for nat. gas).
And it's due to the economy getting back on its feet, a colder spring, and higher CO2 costs. (In North West Europe)

446% year to year according to this:

European Union Natural Gas Import Price

In depth view into European Union Natural Gas Import Price including historical data from 1960 to 2023, charts and stats.

ycharts.com

 

[stoveliker]

Well, the price my family is paying has increased by 212% since mid 2020.

I don't know how the import prices are affecting the consumer price - possibly there is a delay.

 

[stoveliker]

Or maybe there is a large part fixed (not percentage) taxation

 

[peakbagger]

BTW, the natural gas cycle for years was 3 years peak to peak. Start with a year of peak prices, drillers staff up and move their rigs into the field to drill new gas supplies and then tie into the distribution system. That takes awhile. The gas starts going into the system and prices come down. That starts to impact the drillers, the high cost ones pull out ,many who are leveraged stay out until they go bankrupt selling gas at less than cost. The market is flooded with natural gas and the price collapses. Drillers pull out and the supply dips. Prices then go up and the cycle starts again. Note this is very simplistic description of complex market, most driller hedge their drilling by signing contracts rather then selling into the open market.

One of the many changes to the market is the horizontal drilling wells are reportedly "easier" to be set up to bump up their yield . The driller uses the same deep vertical bore hole but can drill horizontally in multiple directions from that same hole opening up new supplies. They are normally drilled in "tight" structure so the typical bore only puts out a reasonable yield for a few years so they have to drill new bores anyhow at some point.

 

[ABMax24]

Well, the price my family is paying has increased by 212% since mid 2020.

I don't know how the import prices are affecting the consumer price - possibly there is a delay.

Their supplier probably buys gas on contract, so they don't see the large ups and downs of the market. If gas prices stay this high for a while though it will be seen on residential heating bills.

 

[stoveliker]

Data I found for nat. gas, indexed from Jan. 2019.

 

[peakbagger]

The sad reality is most paths to low carbon environment is to price the fossil fuels high to encourage a switch to renewables.

 

[ABMax24]

One of the many changes to the market is the horizontal drilling wells are reportedly "easier" to be set up to bump up their yield . The driller uses the same deep vertical bore hole but can drill horizontally in multiple directions from that same hole opening up new supplies. They are normally drilled in "tight" structure so the typical bore only puts out a reasonable yield for a few years so they have to drill new bores anyhow at some point.

That's a very valid point and very true of directionally drilled wells. A friend used to work as a production engineer for a local oil and gas company, they had discovered very prolific wells and were drilling up to 25 wells off a single site in all different directions. The gas from these wells was not accessible 15 years ago, the technology did not exist, direction drilling has come a long way along with fracing. The biggest frac I have heard around here is 60 individual zones with 50 tons of frac sand (propant) per zone for a total of 1500tons, plus of course a large pond worth of water to pump down the well. The downfall of this process is the relatively short life of these wells, some of them have half lives of as little as 6 months, meaning 6 months after kickoff the well is producing half as much gas.

For example here is a screen shot of one of these pads, this information is all freely available through petroninja.com.

 

[EbS-P]

It’s supply and demand. I don’t see this as an energy shortage just a realignment if the supply chain that has been influenced by covid. Oil prices dropped when we all stopped driving. That has an impact on natural gas too. Supply shrank. Europe is trying to figure out how to not be completely dependent on Russia for its natural gas, but Germany just signed a big pipeline deal with Russia. US is now exporting more LNG as the price is up and we have developed that infrastructure. As we near peak oil I would imagine that the price of natural gas to increase (no good reason just my gut). Didn’t hear what OPEC was going to do but I think they had a meeting this week. Saudi’s are trying to diversify their holdings as quickly as possible while at the same time not wanting to appear bearish on the long term oil market.

Big oil companies are putting big dollars into exploration that needs 20-30 to see a return on.

After the Texas debacle it is clear that infrastructure is not hardened to withstand record breaking or even near record temperatures. Sure policy played a role in what happened in Texas but if you can keep natural gas pressure in your lines due to increased demand at the residential level(was kinda irrelevant after they lost power) is speaks to larger delivery/infrastructure issues (current pipes are only so big and can only run as a certain pressure).

So in short, I believe it’s not an energy shortage it’s energy infrastructure/delivery issue on scales that our now globally connected energy markets are reacting to due to short term complications and longer term grow that has not kept pace with infrastructure investments.

Evan

 

[ABMax24]

I don't see a shortage coming to North America, we produce a lot of our own energy and have the wealth to purchase the shortfalls from the global market, China is signalling they will attempt to do the same (especially in regards to coal) to keep the lights on and the factories humming. Somewhere in the market though countries and people will see a shortage, because they will be priced out of the market.

I think the LNG topic is an interesting one, for the last dozen years North America has had a glut of natural gas, LNG changes that and allows other markets access to our cheap natural gas. At the same time though North American gas prices will rise to be more reflective of the global average. It's good for producers, not good for everyone else.

@EbS-P I believe your belief on rising natural gas prices is correct, partly because of a more global market as stated above, and also because natural gas will continue to replace coal and oil for electrical generation. For the decades to come some kind of quick response peaker power plant will be required to fill the gaps in renewables output, for many reasons I believe natural gas fuelled turbines will be the go to choice.

 

[ABMax24]

The Asian spot price for LNG hit an astounding $34/MMBtu last week. These prices are literally unaffordable if passed on to the consumer.

China is signaling they will continue to purchase greater volumes of LNG regardless of cost to keep the lights on, posing issues for Europe who is also struggling to replenish gas storage facilities ahead of winter.

India is still facing coal shortages, more than half of the coal power plants have less than a 3 days stockpile onsite, and more than 80% of the plants have less than a week supply left. The state run Coal India can't keep up with demand as power plants turn to internal supply on increased costs for imported coal.

Explainer: What's behind the wild surges in global LNG prices and the risks ahead

In less than a year and a half, liquefied natural gas (LNG) prices have lurched from record lows to record highs, with the market first reeling from the impact of the pandemic and now unable to keep up with a global recovery in demand.

www.reuters.com

Chinese energy order points to harsher gas crunch for Europe

Beijing reportedly demands energy supplies to keep factories working at all costs

www.ft.com

India could run out of coal soon. So why is a country with such big reserves facing shortages?

More than half of India's coal plants will run out of energy by the end of the week, according to government sources, leaving the world's second-most populous country in crisis. We explain the factors leading to India's alarming coal shortage.

www.abc.net.au

 

[clancey]

We are in for a long hard ride..I think this winter will be a rough one and thank goodness most of us are prepared.. clancey

 

[WiscWoody]

LP is over $2 a gallon up here now, up from the $1.29 a gallon I paid in June and yes I have plenty of good dry wood so it won’t cost me much to heat my small abode this winter again.