Extreme heat is quickly becoming a threat to global fuel security

Extreme heat is quickly becoming a threat to global fuel security

(Sept 10): Scorching temperatures from Texas to Tokyo this summer are the latest reminder of a growing headache for the energy system, as extreme heat threatens fuel supplies.

In addition to causing spikes in electricity demand as people turn on air heaters, the scorching temperatures have led to disruptions at oil refineries. That helped keep US gasoline prices higher and saw diesel prices rise more than crude. This summer has been particularly difficult: July was the world’s hottest month on record, second only to June’s hottest month.

The scorching heat has led to refiners cutting oil production by at least 2% globally in the past two months, according to the Macquarie Group. While that may not seem like much, the shutdown has hit a refining process that has been stretched by years of underinvestment and oil product markets that were already tight due to the war in Ukraine.

“The extreme weather conditions we’ve seen this year is a big deal,” said Ben Luckock, head of oil trading at behemoth Trafigura Group. “The heat has created major problems for refineries in Europe and America with more emissions and problems that are difficult to fix,” he said in an interview in Singapore this week.

European crude production fell by 700,000 barrels a day in the summer from a year earlier, according to estimates from sector consultant FGE. That’s about 6% of the region’s output, based on figures from BP Plc’s latest World Energy Review.

More than half of the decline was due to heat, said Steve Sawyer, FGE’s director of refining and head of downstream.

As well as tightening supply, rising temperatures are increasing demand for fuel oil, which is often used to generate electricity in the Middle East and South Asia. They add to transportation costs by blocking important waterways such as the Rhine River and the Panama Canal.

“Rising temperatures are reducing the efficiency of refinery units” and there are also more shutdowns due to aging plants, said Serena Huang, Asia lead analyst at Vortexa Ltd. market volatility. “

Excessive heat is still a bigger problem in stretched power grids than fuel refineries. But its impact on fuel markets has been magnified by declining inventories, with US inventories of middle distillates, including diesel, near a five-year low.

And it’s not just rising mercury that threatens refinery jobs and fuel prices.

Henning Gloystein, the energy’s director of climate, said: “Climate change is also causing severe winter weather in the Northern Hemisphere as Pacific heat can move north and push the polar vortex south, causing cold in North Asia, Europe and North America. and facilities at Eurasia Group.

The freeze in the US at the end of December was a case in point. Refinery production fell by about two million barrels a day during this period, said Parsley Ong, head of Asia energy and chemicals research at JPMorgan Chase & Co.

The rise of climate-driven clean-up disruptions highlights a growing array of challenges as the world tries to wean itself off fossil fuels, while at the same time tackling its impact on the climate.

“The market is extremely sensitive to any unexpected supply disruptions anywhere,” said Frederic Lasserre, global head of research & analysis at Gunvor Group Ltd. “Everybody knows there is no plan B. We have no stocks, and we have no excess capacity anywhere. “

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