The Polar Vortex’s Impact on the Energy Industry
Reduced Energy Supplies and Heightened Energy Demand
A polar vortex is sweeping the US, causing record-breaking cold temperatures and unprecedented conditions for the energy industry. A polar vortex is an area of swirling cold air surrounding the North Pole and the South Pole. Sometimes the North Pole’s vortex expands in the winter, pushing frigid air southward.
The recent polar vortex has caused electricity and oil prices to surge because people are cranking up their heat as energy supply chains are being disrupted. These trends have also caused power outages in a number of states.
Power Outages in Texas
In Texas, as of yesterday morning, more than 4.2 million people had lost power as a result of the sudden cold snap. Households in Louisiana and Mississippi also suffered outages.
Many parts of Texas have recently experienced the coldest temperatures seen in 30 years. As demand for energy spiked, supply was abruptly reduced because cold and ice caused problems for natural gas, coal, wind, nuclear, and solar energy sources.
Climbing Oil Prices
The cold snap also caused oil prices to rally. Brent-crude futures, the benchmark for international energy markets, climbed to $63.30 per barrel earlier this week. This was the highest price seen since January 2020 when much of the world was still unaffected by the COVID-19 pandemic.
Oil prices were already climbing before the polar vortex because of recovering demand, OPEC supply reductions, and shrinking stockpiles. Many analysts expect that even after the impacts of the polar vortex wear off, oil prices will stay strong.
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