Arctic freeze and Natural Gas prices?

[bucktalk]

Wondering if the massive amount of natural gas usage during this deep cold snap nation wide will impact the price of natural gas from the well? Will royalty owners see any impact? Will the state see a positive impact usage of natural gas?

[gopokes88]

in a word, yes.

[gopokes88]

Normal price for nat gas is about $2.50. That's not a typo, gas is selling for $368/mcf

[catch22]

christ almighty. big utility bills coming up

[gopokes88]

the reason we're having rolling blackouts is one contract reached $53,000/mcf. They pretty much had to cut back, the price was going parabolic.

[bucktalk]

But will this massive usage of natural gas make a sizeable improvement with the state budget regarding gross production receipts?

[Bill Robertson]

Might massive gas price increases during an emergency fall under the price gouging statute?

[gopokes88]

Might massive gas price increases during an emergency fall under the price gouging statute?

no. because if you call it price gouging producers will just let the well freeze off. the high price gives incentive to do everything possible to keep it flowing

[gopokes88]

But will this massive usage of natural gas make a sizeable improvement with the state budget regarding gross production receipts?

maybe a nice bump, but not like $100 million or something.

the reason price is soaring is the huge amount of production offline. so for every expensive mcf that gets sold 50 are offline.

35% of the us oilfield is offline right now.

[gopokes88]

65% of the Permian is offline.

35% of the US total

https://www.bloomberg.com/news/artic...?sref=VEjJXJjm

[catch22]

maybe a nice bump, but not like $100 million or something.

the reason price is soaring is the huge amount of production offline. so for every expensive mcf that gets sold 50 are offline.

35% of the us oilfield is offline right now.

What does OG&E do for unusual peak usage like this? My utility company has a huge propane storage facility that they use to help cover peak demand or price spikes. I am not sure how it works exactly (do they dilute the NG with propane?) but they mentioned something about that in a recent bill to help smooth demand and resource cost spikes. I think it's just for their electrical generators, not into the customer supply lines.

[OkiePoke]

Enable has a storage facility (or a few) near Ada that can and probably did get tapped. That thing is probably empty now.

[gopokes88]

What does OG&E do for unusual peak usage like this? My utility company has a huge propane storage facility that they use to help cover peak demand or price spikes. I am not sure how it works exactly (do they dilute the NG with propane?) but they mentioned something about that in a recent bill to help smooth demand and resource cost spikes. I think it's just for their electrical generators, not into the customer supply lines.

Let’s see if I can explain it.

OGE uses gas to generate power.
ONG uses gas for consumers to heat homes.

Devons (as an example) gas flows to Enlink who processes it then stores some, sells some to ONG, sells some OGE. In the summer inventories build because heating demand is minimal, and consumer use is pretty consistent. (Stoves, dryers, pool heaters)

In winter even with the gas continuing to flow in, storage declines.

Right now you have huge demand from both OGE and ONG.
Devon’s supply from the field is hampered.
Getting gas out of storage isn’t fully operational as some of that is frozen out.

This is why the spot market is 100X more expensive than normal.

OGE usually generates power around .03-.04/kW/hr (last I checked) so their gas plants are probably producing around $3-4/kW/hr. Down the road the corporation commission will allow them to raise rates to cover that cost. Federal bailout is possible too.

That’s a high level view. You have other producers and midstream processors who ensure an efficient market. When an oil and gas company talks about “marketing” this is what they’re referring to.

One of the reasons they had no choice but institute blackouts is, if the demand exceeds available capacity, in theory the price will continue to increase to infinity. So they forced demand to cap out to try and regain some stability to the system. From a technical standpoint the whole grid could fail and everyone loses power but that’s for an engineer to answer.

[gopokes88]

You could build more redundancy into the system to ensure this doesn’t happen again, but everyone wants cheap power.

Well this is a 2 standard deviation event, to build that redundancy it costs a lot of money which raises rates.

It’s a balancing act for sure.

[SSEiYah]

I'm not looking forward to my ONG bill. My 80k BTU gas furnace has literally been running nonstop to try to maintain a 67* setpoint. My Nest thermostat says I had 23 hours of use yesterday. Normally it is 3-4 hours this time of year.

[Bill Robertson]

no. because if you call it price gouging producers will just let the well freeze off. the high price gives incentive to do everything possible to keep it flowing

I'd buy that for a reasonable increase. But 100s or 1000s of times increases are irrational and taking advantage of the emergency. And "Pay or we'll shut down" is blackmail. Plain and simple. I know the world has changed, for the worse, but I worked for Kerr-McGee when they were a major natural gas producer and they wouldn't have done this.

[gopokes88]

I'd buy that for a reasonable increase. But 100s or 1000s of times increases are irrational and taking advantage of the emergency. And "Pay or we'll shut down" is blackmail. Plain and simple. I know the world has changed, for the worse, but I worked for Kerr-McGee when they were a major natural gas producer and they wouldn't have done this.

All of that is false.

I have a friend working around the clock trying to keep the gas he produces flowing. If you told him you have to sell it for $10/mcf. He’d go to bed and worry about it later. The people actually producing at this prices are keeping a lid on it from going even higher.

Which speaking of, spot hit $999/mcf.

https://twitter.com/breakingmkts/sta...880607234?s=21

[Mott]

Dad was a geologist working for Sohio, back in the day, and he had a bumper sticker, “Let the Bastards freeze in the dark”. Anyone remember those? I think it was a reaction to people in the NE US complaint about high petroleum prices. Who would have thought it would happen here. Some pics of a frozen gas plant,

[BDP]

Wait... the people freezing in the dark are the bastards?

[mugofbeer]

He gave the context. It's not meant to be taken literally.

[BDP]

He gave the context. It's not meant to be taken literally.

But within the context, people are literally freezing in the dark. And, within the context of the statement, those are the bastards.

What is the metaphoric gist I'm missing?

Are you trying to say that only the people freezing in the dark that complain about the price of freezing in the dark are bastards?

The context is people freezing in the dark in the United States of America. The question really is, are you okay with that? Literally.

[Teo9969]

But within the context, people are literally freezing in the dark. And, within the context of the statement, those are the bastards.

What is the metaphoric gist I'm missing?

Are you trying to say that only the people freezing in the dark that complain about the price of freezing in the dark are bastards?

The context is people freezing in the dark in the United States of America. The question really is, are you okay with that? Literally.

That's part of the context, but the other part of the context is there are very few people doing dangerous work around the clock to try and keep the system from failing, so people can kindly shut their mouth about the prices.

[Mott]

I’ll try again, if you were old enough to remember those bumper stickers, they were a response by oil people in Ok, and Tx, to those in the North East complaining about the high costs of home heating oil, i.e., regulation. So the attitude was so? If you can’t afford it then you (bastards) can freeze in the dark. So now Tx is doing the same to itself, a sad bit of irony there.

[mugofbeer]

Canadians have used it, too, about earlier attempts by eastern provinces to "plunder" the natural resources of Alberta and British Columbia.

[Dob Hooligan]

I’ll try again, if you were old enough to remember those bumper stickers, they were a response by oil people in Ok, and Tx, to those in the North East complaining about the high costs of home heating oil, i.e., regulation. So the attitude was so? If you can’t afford it then you (bastards) can freeze in the dark. So now Tx is doing the same to itself, a sad bit of irony there.

Also, “Drive 90 and freeze a yankee” was a popular bumper sticker around 1980.