A severe winter storm is disrupting U.S. oil and gas production, leading to increased power demand and fluctuating energy prices across the country.
A sweeping winter storm, referred to as Fern, has struck large portions of the United States this week, significantly impacting energy production and prompting utilities to prepare for potential power shortages.
Frigid temperatures, heavy snowfall, and ice have blanketed areas from the southern Rocky Mountains to New England, causing travel disruptions and straining infrastructure. This extreme weather event is one of the coldest blasts of the season, according to forecasts from the National Weather Service.
The storm has already begun to affect U.S. energy production, with analysts estimating that total crude oil output could decline by approximately 300,000 barrels per day. This reduction is largely due to operators scaling back activities in key shale basins. The Permian Basin, which typically accounts for about half of the nation’s oil production, may see a reduction of around 200,000 barrels per day as sub-freezing conditions persist.
In North Dakota, the third-largest oil-producing state, regulators have reported production shut-ins that have lowered output by between 80,000 and 110,000 barrels per day. This decline represents a significant portion of the state’s overall production, as cold-weather challenges impact wells and equipment.
Natural gas production is also feeling the strain, with analysts from Energy Aspects projecting a potential loss of up to 86 billion cubic feet of output over the next two weeks. This includes an estimated 35 billion cubic feet from Appalachia, one of the country’s most productive gas regions.
Power grids across many areas of the country are on high alert. U.S. Energy Secretary Chris Wright has urged grid operators to utilize backup power sources, such as data centers and industrial facilities, to help prevent outages. The U.S. Department of Energy estimates that more than 35 gigawatts of unused backup generation capacity could be activated if necessary.
In the Southwest Power Pool, where electricity is transmitted from southern generators to colder northern states, real-time wholesale power prices have surged above $200 per megawatt-hour due to transmission congestion. Conversely, strong winds in parts of New Mexico and Oklahoma have generated so much electricity that prices briefly turned negative, forcing some wind farms to pay to deliver excess power.
Utilities, including CenterPoint Energy and Duke Energy, are mobilizing crews and systems to mitigate the storm’s impact on customers. The PJM Interconnection, which serves millions across the Mid-Atlantic and Midwest, has warned that it could set a new winter peak demand record later this week.
This winter weather is also altering fuel market dynamics. Analysts anticipate a decrease in gasoline demand as people avoid icy roads, while diesel prices have risen due to increased usage for heating and power generation. U.S. ultra-low-sulfur diesel futures have reached their highest levels since late last year.
With transport hubs, including key Colonial Pipeline delivery points, covered in snow and ice, distributors are cautioning that fuel logistics may face disruptions for days as the country continues to contend with the cold.
The ongoing winter storm underscores the vulnerabilities within the U.S. energy sector, as producers and utilities navigate the challenges posed by extreme weather conditions, leading to fluctuating energy prices and potential supply shortages.
According to The American Bazaar, the situation remains dynamic as energy producers and utilities work to adapt to the ongoing challenges posed by the storm.