U.S. Blackout Risk

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Michael Tanner: [00:00:09] What’s going on, everybody? Welcome into the Monday, November 25th, 2024, edition of the Daily Energy News. Beat Stand up. Here are today’s top headlines. First up, Europe is already facing its next energy crisis. Next up, half of the U.S. at risk for blackouts during extreme cold this winter, according to grid watchdog. Finally in the new segment, California gas warfare heats up over exodus of oil companies. I will then jump in quickly, cover what happened with oil and gas prices and opine a little bit about what might be coming in line. And then we will let you get out of here. Stu is out on assignment today, so I am rocking a solo show. Let’s go ahead and kick us off. [00:00:51][41.8]

Michael Tanner: [00:00:52] All right. So first one we’ve got here, Europe is already facing its next energy crisis. It’s pretty unbelievable. We all remember back in 2022, that was basically the first winter of the Ukraine conflict where things got really spicy in Europe. And what’s looking like is that things are going back to the same sort of 2022 shock. I’ll go ahead and start reading straight from the article here. Rapidly, the rapidly depleting gas reserves and looming upcoming supply cuts from Russia have the makings of a fresh energy crisis in Europe, which is still reeling from the aforementioned price shock that we did see two years ago. Already, what we’ve seen with these escalating tensions in Ukraine, they’ve contributed to about a 45% surge in gas prices this year. And even though that’s still far below the records that we’re seeing over in 2022, we’re getting now to the point where the risks of them getting back closer and closer to those levels as we haven’t even got into really the heart of the winter is putting pressure on regulators, consumers and most importantly, the people, again, that use this gas every day. I want to throw this first chart up here. European gas inventories are getting quickly depleted. If you’re watching us on YouTube, which I highly recommend, by the way. What you’ll see is that normally over the last, I would say basically for the last year or so, basically since January of 2024, the gas storage levels have been above their five year average. But as you’ve seen recently, basically starting at the end of October, early November, it’s actually begin to plunge at a steeper rate relative to the five year average and is now crossed below the five year average. If you’re listening to us on blubrry or podcast excuse me, I mean, it’s got it’s got all the makings of spicy. Remember, you know, basically Russia has announced that they are going to basically roll back gas going into Europe. Europe has done nothing to again to diversify their gas. It’s got all the makings of another spicy winter. And that’s I don’t say that in a good way because European consumers are about to get hit. Let’s do this second chart up here. Europe braces for expensive gas in summer. I mean, look at those spreads that are being forecasted from basically the summer 20, 25, winter 2025 natural gas, EUR over $0.04, or in this case, euros per megawatt hour. Holy smokes, guys. I mean, it’s going to get crazy. It always comes back to you guys, diversify you. In everything we do, we talk about investing in oil and gas divert. Why diversify your portfolio when you’re talking about anything in life? If you’re a business and you have revenues, diversify your revenues as much as you can. Because if not, if you’re too dependent on one, when that goes away, guess what? All of a sudden things begin to crumble. So when you’re solely reliant on Russian gas, this is what gets you into situations like that. It’s not not looking good. Luckily, what happened in 2018, the winter of 2022, is Europe was able to avoid these shortages, thanks in part to a milder weather. The problem is, as we’ll notice in another article, this winter is looking a little bit colder and the rate of drawdown of the gas storage is more. So it’s going to be crazy. Obviously, LNG imports are going to be a thing. We’re already seeing natural gas prices rise a little bit. You know, again, if you’re in Europe, keep your shoes, keep your clothes, stock up on what you can because it’s going to get cold. [00:04:12][200.5]

Michael Tanner: [00:04:13] Let’s move to the next one. Half of the U.S. at risk for blackouts during extreme cold this winter, according to grid watchdog. I mean, guys, it’s going to be cold here, too. A new report out by the North American Electricity or Electric Reliability Council known as Nurk, has basically they’re in charge of assessing the United States. And Canada’s grid reliability has basically released a report calling the 2024, 2025 winter of reliability assessment as some very crazy stuff, the report warns. Here’s a quote. Electricity supplies are at risk from freezing temperatures that threaten reliable operation of bulk power systems known as deep’s generators, fuel supply issues for natural gas fired generation and wind and solar energy resource limitations. Pretty unbelievable. And one of the reasons why they’re so worried about specifically the grid this winter is going back to what I talked about, what’s happened to be in Europe. It’s not just going to be cold in Europe. The EIA is forecasting a cold. For winter then this year, which is also going to strain not only renewables, but also some of the natural gas fired power generation. Quote from the report Natural gas, fire fired power generator availability and output can be threatened when natural gas supplies are insufficient or when flow of fuel is unable to be maintained. It’s really that second part. Unable the flow of fuel, unable to be maintained, it is most likely going to unfortunately be the issue. And that really hits to the point of where you’re reliant on a single source. That’s the problem with the grid. It’s solely source with a few different things. We’ve obviously attempted to diversify away, but I mean, if you just have one coal plant in your town that does get Old Spice, you’re just reliant on wind or solar. It could get even worse. The Midcontinent independent system operator known as MISO, that covers that’s one of the kind of electrical reasons it covers 15 states across the Midwest and northern Great Plains and a little bit of south central U.S. has actually reduced its coal and natural gas fired generation by five gigawatts since last year. And they specifically point that out. Nurk does, because that’s going to create problems when all of your other systems can’t come up. You’ve or you’ve reduced it in favor of these other types of electricity generation, a.k.a. wind and solar, which are going to struggle just as much, if not more, in this crazy weather. To give you guys an idea, the average American home consumes about 900,000 watt hours per month. And, you know, because it’s sort of a it’s a sign you sold a wave, which means you use a lot more energy in the mornings and at night than you do during the day because you’re gone. But to give you an idea, five gigawatts of electricity generation running for one hour could power 50,000,100 watt light bulbs for one hour. So, I mean, that’s how much we’ve taken offline. We’ve taken off 50 million light bulbs for one hour by just artificially reducing this up. It’s pretty unbelievable. You know, some of the natural gas, specifically the Natural Gas Supply Association, which is I own a natural gas line here, has come out and said some of the natural gas reliability that is a little bit overblown. I would tend to agree on that side of it. I mean, it’s in NRC’s interest to just say that Red Sox, we need more funding. There are lobbying group on the grid side. It’s on the natural gas lobbying side. It’s in their best interest to say, well, you know, it’s not that bad. The answer, obviously, is somewhere in the middle. The big issue is that we’ve taken off intermittent electricity, a.k.a. natural gas and coal in favor of renewables, which are going to do way more in the winter. And it’s not going to look good because it could be chilly. So get your Koch guys. Watch out it again. It comes back to what I’m saying. We need to make sure that we have a sufficient grid. You know, it doesn’t matter if we have ample supply. We’ve got ample supply here. And the problem is the grid sucked. And, you know, I cut this story from the line up talking about some of the the energy secretary nominee, specifically, Chris. Right. Doug Burgum of interior and the head of the EPA. One of the things they’re going to need to dive into is grid reliability regardless. So pretty fascinating. Guys, get your winter coats. It’s going to be cold. [00:08:02][228.9]

Michael Tanner: [00:08:02] Finally, California’s gas warfare heats up over exodus of oil companies. I mean, this is pretty funny, guys. So if you don’t remember about a month and a half ago, a friend of the show slick himself, oil slick himself, Governor Gavin Newsom, signed assembly Bill X two, Dash one. This grants the state the power to, quote, require oil refiners to maintain a minimum inventory of fuel to avoid supply shortages. It’s also designed to limit, quote, higher profits for the industry and authorizes this. Whatever this bureaucracy they’re creating is to force, quote, refiners to plant for resupply during refiner maintenance. Basically. Two days later, Phillips, 66, announced it’s shutting down the refinery, which has a facility in Carson and another five miles away in Wilmington that’s linked by a pipeline. And they’re doing that in the fourth quarter of 2025. So about a year from now on, both sides have been in operation for basically 100 years and have done about a million do about a million barrels of gasoline for Southern California motors. That’s even according to the Los Angeles Times, which is no friend of the oil business, I’ll tell you that much. Phillips, 66, believes that, quote, This is the long term sustainability of the Los Angeles refinery is uncertain. And I love that this article says, which is a polite way to say that lawmakers are creating hostile business conditions and that conventional energy companies do struggle under. Give you an idea, guys, that Phillips, 66, has about 600 employees full time and about 300 contractors will be impacted. And obviously, we’re going to see you’re going to see if you live in Southern California. Gas prices also shoot up tremendously. And Phillips, 66, has pledged to work with California to maintain current levels of effort to increase supplies to meet consumer needs. They will be out of there come 2025. So who knows? It just goes to show you that when the free market is the best way to manage all, it’s going back to the grid. If they’re going to mess with the grid. And what I would recommend if somebody asked me, Hey, Mike, what would you do to fix the grid? I would incentivize the free market to figure it out because I know I’m not smart enough to figure it out. But I do know that the market will figure it out because the market will always guide itself. I just got done listening to a great interview with the CEO of Uber talking about how they manage their prices. And guess what one. They don’t manage their prices. Guess what? As the prices of Ubers rise on the marketplace, more drivers sign up because they see a profit to be made. And guess what? That increase of supply of drivers drives down the price because now the supply reaches demand. Vice versa. When prices get too low, drivers drop off raising the price because now demand is higher than supply. The same thing can happen in the grid if you can incentivize people to invest in the grid. And I don’t know quite how to do this because the problem is, you know, that the grid is somewhat monopolistic, is we don’t need seven different grids. You know, we need one grid. You need one set of pipes running into your house. You don’t need seven different companies. So we do need a way to figure that out. But if I was on this Energy Council that they’re creating. Go. Chris. Right. Go. Doug Burgum I would figure out a way to do grid reliability and make the marketplace figure out how to fix the grid because they will figure it out and it’s going to hurt you guys in California. If anybody are listening from California, you’re about to be buying all of your oil from China. I’m sure they produce it clean, a much cleaner. You know, it is unbelievable. I mean, we know it’s super hard if you’re an oil and gas company to do business in California. The attorney general, Rob Bonta, has recently sued ExxonMobil over, quote unquote, plastic recycling messaging. Okay. It’s a scam. They’re just trying to it’s all look what we’re doing. We’re hard on oil and gas. Well, guess what? You’re driving out energy and you’re going to jack up prices. So you got with you know, if I was in California, I would your tax dollars are going, in my opinion, to some pretty ridiculous stuff. [00:11:37][215.4]

Michael Tanner: [00:11:38] Let’s go ahead and jump over to oil and gas finance. Before we do that, guys, as always, we need to pay the bills. Thank you for checking us out. Here on the world’s greatest website, the energy news beat.com all the news and quote unquote analysis you just heard is brought to you by that said website. When the team do a tremendous job making sure that website stays up to speed, everything you need to know to be the tip of the spear when it comes to the energy and the oil and gas business. Go ahead and hit that description below on podcast for all of links to the timestamped links to the articles and links to our substack. www.theenergynewsbeat.substack.com. Go ahead and give us a subscribe there. Also, go ahead and subscribe to our YouTube channel making a final push through the end of the year. We really appreciate you guys there as always. Guys, if you have a tax problem, chat please. We have an offering. Invest in oil, energy, newsbeat.com. It’s a great way will show you how to reduce your tax burden by investing in oil and gas. Make a little bit of dividend money, but also diversify your portfolio. And specifically, you can finally become Billy Bob Thornton land man. If you if you’ve been watching that show for the past two weeks and you want to become Billy Bob Thornton, I promise you the best way to do it is invest directly in oil and gas, get yourself some working interest, and you can also keenly lower your tax burden. That’s the key guys. Invest in oil dot energy newsbeat.com. [00:12:50][72.3]

Michael Tanner: [00:12:51] I mean pretty crazy guys. On Friday, S&P 500 was up about 3/10 of a percentage point. Nasdaq was up about 0.17 percentage points. Two and ten year yields both fell about 0.6 and point nine percentage points. Bitcoin had a pretty flat week, $98,000. I mean, it’s been on an absolute. Hey, guys, pretty unbelievable. Crude oil is actually up about two and one percentage points on Friday. Finished the day somewhere around 7133 currently as I’m recording this about 7 p.m. here on the 24th. Prices have dropped to about, you know, about $0.02 to 7122. So excuse me, it was it was 71. 24 is which was the close. And we saw Brant oil is actually down was actually flat on Friday and flat right now currently sitting about $75. Natural gas actually closed at about 131 $3.10 has since jumped nine percentage points In about the hour and a half. It’s been opening up to $3.41, basically re-upping with the front month contract as things roll over. You know, really reason for that one month or that 1% buy on Friday, which was actually a two week high, was mainly what’s going on in Ukraine right now, which basically is pricing in a little bit higher. But geopolitical risk is, you know, we’re launching, you know, ICBMs are getting launched into Ukraine. Long range missiles are being launched in a rush. It’s just crazy, guys. They were up about, you know, both benchmarks were actually up, as I said, about 6% over the whole week, which is absolutely pretty crazy. [00:14:16][85.2]

Michael Tanner: [00:14:17] We also did see rig count drop. Let me go ahead and pull them up real quick just so we can take a look at rig counts. I forgot to add rig counts were down one on the week to 583. That’s down 39. We can see we’re closing that gap from last year from last year, but still down one rig week over week. Canada was added one rig. Internationally, we added three weeks. So things are setting up. [00:14:38][21.4]

Michael Tanner: [00:14:39] YOu know, we’re moving into Thanksgiving. So things are a little bit of quiet. On the oil and gas front. I’m gearing up to do a few more deal spotlight, just getting my research in place. I think we’re going to cover the Ovintiv Uinta for Montney Swap. I think there’s some really interesting stuff in there. Just trying to line up some gas there. But guys still will be doing a solo show tomorrow will be back Wednesday. In your ears for us for our last daily stand up of the week, we’re going to drop from the bank to interviews that started on Thursday. Friday. You’ll get a quick recap for the week on Saturday and then we’ll be back in. Full effect for next week, guys. I appreciate you sticking with me here. For Stuart Turley, I’m Michael Tanner. We’ll see you guys tomorrow. [00:14:39][0.0][865.4]. We’ll see you guys tomorrow. [00:14:39][0.0][865.4]

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