EIA: Wholesale Electricity Prices to Increase This Summer // Energy Sec. Granholm to Meet With Refining Execs //EU Gas Prices Jump As Gazprom Cuts Supply //

EIA: Wholesale Electricity Prices to Increase This Summer

The Energy Information Administration released its latest Short-Term Energy Energy Outlook. Feast your eyes on the bad news:

Here's the rundown on why this is happening:

• "Wholesale prices are especially tied to natural gas prices because natural gas-fired units are often the most expensive (marginal) generators dispatched to supply power. The natural gas price at the Henry Hub averaged $8.14 per million British thermal units (MMBtu) in May 2022, compared with $2.91/MMBtu in May 2021."

• It used to be that you could default to coal when gas got too pricey but "in recent months, coal power plants have responded less than in the past as an alternative source of generation, most likely as a result of continued coal capacity retirements, constraints in fuel delivery to coal plants, and lower-than-average stocks at coal plants."

• The EIA doesn't mention this, but this situation is endemic to the way our electricity spot markets work. Renewables and natural gas force our coal generators, or Palisades nuclear power plant in Michigan, leaving us hugely reliant on natural gas for reliability. It also makes us vulnerable to price spikes in the natural gas market.

Energy Sec. Granholm to Meet With Refining Execs

Secretary of Energy Jennifer Granholm is set to meet with refining executives on June 23 to discuss high gasoline prices. The meeting comes at a time when tensions between the White House and Big Oil are running high. 

Biden's administration has been sending mixed signals to the oil and gas sector. On the one hand, they're demanding more output. On the other hathey're indicating they don't want to the industry to exist in 5-10 years. This clip of Granholm on CNN from Wednesday night is emblematic.

But the administration is eyeing the November 8th mid-terms with trepidation. "U.S. national average gasoline price hit $5 per gallon last week, putting additional pressure on the Biden Administration as gas prices are now nearly $2 a gallon higher than they were at this time last year, and inflation saw its fastest annual increase in May since the end of 1981," reports Oilprice.com. Voter anger over gas prices--and electricity prices--will only continue to mount. 

It's unclear what will come of the meeting, and what understanding the two sides could possibly broker. The administration has already raised the stakes quite high by considering the invocation of the Defense Production Act to seize idling refineries. 

For their part, Exxon has suggested the following:

"In the short term, the U.S. government could enact measures often used in emergencies following hurricanes or other supply disruptions -- such as waivers of Jones Act provisions and some fuel specifications to increase supplies. Longer term, government can promote investment through clear and consistent policy that supports U.S. resource development, such as regular and predictable lease sales, as well as streamlined regulatory approval and support for infrastructure such as pipelines."

EU Gas Prices Jump As Gazprom Cuts Supply

"Natural gas prices in Europe jumped after Russia stepped up an energy war by cutting supplies through the largest link to the continent to less than half of its usual volumes," reports Bloomberg. 

Benchmark futures leaped 8% in response Wednesday morning. This came after Gazprom slashed Nord Stream 1 volumes by 40 percent earlier in the week, according to Oilprice.com. Gazprom cited "the delayed delivery of gas turbines it had sent to German Siemens for scheduled repairs."

Germany's Economic Minister Martin Habeck called Russian excuses a "pretext." “Their strategy is obviously to unsettle [people] and drive up prices," he said. 

But on Wednesday, Gazprom cut Nord Stream 1 volumes "to a total of 60 percent and also cut supplies to Italy by 15 percent, which pushed European gas prices further up."

Pretext or not, Europe likely feels quite vulnerable right now. 

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Conversation Starters

• EU gives Moldova and Ukraine's bid to join the EU a nod. "The European Commission plans to recommend that Ukraine and Moldova be granted candidate status in a symbolic step forward in the lengthy process to become members of the European Union," reports Bloomberg.

• Australia's electricity operator suspended electricity markets in its eastern states on Wednesday. The Australian Energy Market Operator said it had “determined that it is necessary to suspend the spot market in all regions … because it has become impossible to operate the spot market..."

• Roger Pielke Jr. has another great piece on his Substack entitled "What the media won't tell you about US heat waves." This graph was a standout:

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