Ask the Experts: The Prospective Impact of Pipeline Shutdowns, Natural Disasters and More

Article by Constellation

In our monthly webinar series, the Energy Market Intel Webinar, we offered our customers the opportunity to submit questions to learn more about economic factors and marketplace trends that may affect their future energy purchasing decisions.

Most recently, customers requested information on the natural disasters, such as hurricanes and wildfires, thoughts on the Federal Reserves actions as the economy continues to reopen and the potential impact of pipeline shutdowns on energy prices, and more.

Constellation’s team of market experts addresses them here:

Can you estimate hurricane effects on the Gulf of Mexico, versus the East Coast? 

Hurricane paths either up the Atlantic Coast or if they track into the Gulf of Mexico remain all about the pattern during the peak tropical season – namely the Bermuda ridge. In some years, the Bermuda ridge is strong and extends more west than usual. That forces storms farther south, and in some cases, into the Gulf of Mexico. Other years, the ridge is much weaker, so the storms have more of a window to recurve out to sea. When the ridge is displaced farther north, the East Coast becomes more vulnerable as storms can travel farther north but still get forced into or along the East Coast. We are favoring this year as a combination of 1 and 3.

When do you think the Federal Reserve will make an adjustment on interest rates? 

It depends on what adjustment the Federal Reserve makes. Their decision could slow down bond buying anytime, even just to see what the interest rate markets do when they reduce support. That would be the first step before rates get raised. They believe that this inflation we have is due to the economy reopening and that it is not structural.

Could efforts to shut down pipelines lead to higher energy prices?

Pipelines remain some of the safest ways to transport oil, refined products and natural gas. The ability to move an energy commodity from its supply source to areas where various end users would store or consume is important for price discovery. Restricting pipelines could depress prices in supply-heavy areas and raise prices in more population-condensed areas. The administration has stated goals of carbon reductions by 2030 and 2040.

Comparing imports to exports, the U.S. is no longer “energy independent”– right?

Not necessarily yet. The U.S. is still producing ~11.5 million bbl/day of oil production and exporting sweet crude oil, refined products, gas liquids and liquefied natural gas (LNG). Some exports are below 2019 peak levels for some products such as refined products but others such as LNG are at new all-time highs. There is an inventory of backlog gas and oil wells, but by 2022, decisions that the government makes regarding future drilling leases and pipeline permits could influence forward supply.

In April, Gov. Newsom authorized $536 million for fire prevention in 2021 through initiatives such as forest and vegetation management, clearing fuel around rural homes and retrofitting buildings, clearing underbrush and other fuels. PG&E stated that in 2021 it will use computer modeling that will look at different parts of its transmission system to see where fires could spread the most.  The models will factor in density and dryness of vegetation, landscape surrounding power lines, the density of housing surrounding the lines and the number of recent outages in an area.

Get access to more insights on the latest weather and market factors impacting your energy bill by attending our next Energy Market Intel Webinar.