Energy Crisis in Texas Similar to Hurricane Katrina, Sankey Says
(Bloomberg) -- The energy crisis affecting Texas is reminiscent of Hurricane Katrina and some don’t realize how bad it truly is, Sankey Research LLC’s lead analyst Paul Sankey said in an interview on Bloomberg Surveillance Wednesday morning.
Cold weather and snow that blanketed Texas caused oil production to plunge by one-third of its output, or about 3.5 million barrels, with production in the Permian Basin falling by as much as 65%, traders and industry executives told Bloomberg News on Tuesday. In late August 2005, Katrina shut some 1.4 million barrels a day of oil production, more than 90% of the oil normally pulled from the U.S. Gulf of Mexico.
“This situation to me is very reminiscent of Hurricane Katrina,” Sankey said, adding that in the days immediately after the hurricane, the situation was downplayed but then over the following week it “emerged as a horrendous disaster.”
Natural gas output declined by close to 10 billion cubic feet per day, and spot prices for next day delivery at one hub surged to almost $1,000 per million British thermal units on Tuesday. Front-month natural gas futures declined 0.8% to $3.103 per million British thermal units as of 10:43 a.m. New York time Wednesday.
“We have never seen a loss at this scale at a time when you’re in midwinter,” Sankey said, referring to the lost energy supply. This is “the biggest outage in the history U.S. oil and gas.”
As of Wednesday morning, 2.7 million Texas households still don’t have power, the Electric Reliability Council of Texas, or Ercot, said in a tweet. Power prices in Texas hit the cap of $9,000 a megawatt-hour several times this week. Texas Railroad Commissioner Jim Wright criticized renewable energy sources taking priority over natural gas, but a senior director at Ercot pinned the failures on frozen equipment at gas, coal and nuclear plants.
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