Extreme cold drives US energy prices to highs

US natural gas and power prices hit multi-year highs on Friday ahead of extreme cold that was expected to bring record gas demand while also cutting supplies by freezing wells.

Lower gas supplies at a period of surging demand could test power systems in hard-hit areas. Winter storms in 2021 and 2022 caused widespread damage and power outages in part because many power plants lacked sufficient fuel to operate.

US gas output was on track to drop by 3.7 billion cubic feet per day (bcfd), or 3.4%, over the past five days to a preliminary 10-week low of 104.5 bcfd on Friday, according to financial firm LSEG.

That decline so far was small compared with gas supply losses of around 19.6 bcfd during a winter storm in December 2022, and 20.4 bcfd during another winter storm in February 2021, according to LSEG data.

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Still, US gas demand, including exports, was on track to reach 165.9 bcfd on January 15, 174.3 bcfd on January 16 and 172.9 bcfd on January 17, according to LSEG.

Those daily demand forecasts would top the current all-time high of 162.5 bcfd set on Dec 23, 2022, according to federal energy data from S&P Global Commodities Insights. The freeze is expected to move from the US Pacific Northwest to the central and eastern parts of the country over the next few days. Power grid operators in its path have already told generator owner members to prepare their units to run before electric demand starts to increase.

In a sign of what may be coming, next-day power prices at the Mid Columbia hub in the Pacific Northwest soared to a record high of around $1,075 per megawatt hour, according to LSEG data going back to 2010. That compares with averages of $81 in 2023 and $52 from 2018 to 2022.

Published in The Express Tribune, January 14^th, 2024.

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