The Point of Ayr Gas Terminal in Talacre, Wales, on September 20, 2021.
Christopher Furlong | Getty Images
A global energy crunch is sending natural gas prices soaring in the U.K., Europe and Asia hitting record highs. However, experts say the stratospheric prices seen in Europe are unlikely to carry over to the States.
Much will ultimately depend on what the winter weather brings. But the U.S. is better positioned heading into the colder months given that it’s the world’s largest natural gas producer, and because inventory levels are not as depleted as they are in Europe.
“We’re at a unique point in time now where just all energy prices are going up,” Francisco Blanch, head of global commodities, equity derivatives and cross-asset quantitative investment strategies at Bank of America Merrill Lynch, said last week on CNBC’s “The Exchange.” “The U.S. is much more insulated from this global energy trend than the rest of the world,” he added.
That’s not to say U.S. prices won’t be volatile. Natural gas futures settled at their highest level since December 2008 on Tuesday. On Wednesday, the contract traded as high as $6.466 per million British thermal units (MMBtu).
Natural gas for November delivery has since eased from that level, but it’s still on track for the seventh straight week of gains. The contract currently trades around $5.63 per MMBtu, which is more than double where prices were at the beginning of the year.
But the moves abroad are far more extreme. Analysts at Deutsche Bank noted that in Europe prices are up five fold, while in the U.S. and Asia prices are about 1.5 times higher. In Europe, the price spike in natural gas is equivalent to if oil were trading around $200 per barrel.
“The importance of these moves on inflation, growth and external accounts are not to be underestimated,” the firm wrote in a note to clients. “These price moves are a big deal.”
Coal and oil prices are also jumping. West Texas Intermediate crude futures, the U.S. oil benchmark, topped $80 per barrel on Friday for the first time since November 2014. International benchmark Brent crude, meanwhile, traded at its highest level since 2018. Analysts say that elevated natural gas prices could even prompt utilities to swap the fuel for oil.
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Why are prices jumping?
A number of factors are fueling the price surge in natural gas and commodities like oil and coal more generally.
Demand is rebounding as economies get back to business and consumers return to pre-pandemic activities. At the same time, producers, who suffered through 2020’s unprecedented downturn, have been slow to hike output.
A colder and longer-than-expected 2020 winter meant that European inventory levels were below average heading into the fall. On top of that, slow wind speeds and dry conditions weighed on renewables’ energy output. Carbon offsets are pricey and the continent has moved away from coal-fired plants, meaning everyone was suddenly competing for natural gas.
Europe’s gas production has declined over the last two decades, and the continent now depends on imports from Russia. The country has limited supplies to Europe this year in what some have called a politically motivated move, although this week President Vladimir Putin said Russia could boost output in an effort to alleviate the strain in Europe.
Europe is not the only place in need of supplies. Asian demand is jumping as countries including China look to shift away from dependence on coal. In some cases, cargoes are bypassing Europe for Asia, where they can get better prices.
The Oxford Institute for Energy Studies summarized this confluence of factors, noting it creates “this perfect storm.”
What about in the U.S.?
While the U.S. has its own power problems, as demonstrated in Texas last winter when millions of customers were left in the dark for multiple days, the same price jump and energy crunch playing out in Europe and Asia is unlikely to happen.
“[The U.S.] hasn’t had to rely on the rest of the world to provide its supply and that’s really what Europe’s problem has been,” said Robert Thummel, managing director at TortoiseEcofin. He noted that the shortage stems not from a lack of supply, but rather from a lack of infrastructure — specifically for liquified natural gas.
“You’re not going to see the U.S. to the rescue here, because there’s just not enough infrastructure on either side — on the U.S. side or the European side and most importantly on the Asian side to solve this,” he added.
At the end of the day, Thummel said his forecast for natural gas prices all comes down to weather. A normal winter could see prices stay slightly elevated in the $3 to $4 range, while warmer-than-expected temperatures could see a retreat to between $2.50 and $3. On the flip side, if temperatures drop prices could spike into the double digits.
While the U.S. is in a better position than Europe heading into the winter, such wild swings in overseas energy markets do have cascading effects around the globe. This week Credit Suisse lifted its forecast for fourth-quarter prices by more than 60% — from $3.50 MMBtu to $5.75 MMBtu.
“The near-term set-up around winter storage inventories and increasingly tight global demand fundamentals have proven more bullish than we had anticipated,” the firm wrote in a note to clients. While the new target is elevated relative to average prices in recent years, it’s still below the $6 level natural gas crossed last week.
JPMorgan, meanwhile, raised its 2022 annual average price forecast by $1.70 MMBtu to $4.81 MMBtu in a note titled “unthinkable upside, limited downside.” The firm made sure to point out that it’s atypical to adjust forecasts right before winter weather reports become available. But this time it was warranted. Analysts said there was an “absolute need” to adjust forecasts given the “risks that are plaguing this balance at the current time.”
“We go where the US supply and demand balance takes us, and it has taken us to a place that hasn’t been visited in quite some time,” the firm said. For the current quarter, JPMorgan envisions prices averaging $5.50 MMBtu, which would bring 2021’s average price to $3.65 MMBtu.
While the energy crunch is likely the primary driver of the price action, some of the volatility could also be from Wall Street firms shorting futures into the massive rally, and subsequently being forced to cover positions.
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That was more than 50,000 miles ago, and the car is still going strong!
Take a good look at that digital dashboard display up there, and you might notice the Hyundai IONIQ 5’s odometer is sitting pretty at 666,255 km. That’s over 413,990 miles, and the South Korean EV is, reportedly, still racking up miles — and fast! Over at the Facebook Group Mileage Impossible, the car’s owner claimed he covered all those miles in less than three-and-a-half years … which works out to just under 10,000 miles per month! (!!!)
Nearly 400 miles per day
Nearly 10,000 miles/mo.; via Mileage Impossible.
Like any vehicle being driven extreme miles, Hyundai’s excellent IONIQ 5 isn’t perfect. That means a bunch of stuff broke, including the car’s Integrated Charging Control Unit (ICCU), which means it can’t currently be charged on AC (L1/L2) charger. And, while electric cars don’t need oil changes, they do need other types maintenance, and the differential oils and brake fluids have been regularly changed on this car — which, no doubt, has contributed to its longevity.
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The most significant repair to date was the battery replacement at 360,000 miles (almost 55,000 miles ago, by my math). Remarkably, Hyundai covered the cost of the replacement despite the battery being way, way beyond its original 10 year/100,000 mile warranty.
The most impressive part of all this? Even after enduring 360,000 miles and countless fast-charging cycles, the battery reportedly retained 87% of its original health. (!)
Electrek’s Take
The caption reads, “free replacement of battery, motor, and reduction gear at 580,000 km.”
And now, with this 400,000 IONIQ 5, Hyundai has a shining example of the fact that its soon-to-be American-made EVs can go the distance.
Hyundai is still offering 0.99% APR financing for 60 months on all versions of the hot-selling 2025 IONIQ 5, as well as up to $7,500 in Retail Bonus Cash, which (when combined with other incentives in certain markets) can make a huge difference to customers’ bottom line. It doesn’t look like the two offers can be combined, however, so be sure to do the math and see which deal makes the most sense for you.
Porsche is launching a new EV battery recycling pilot to recover valuable raw materials from its cars’ high-voltage battery packs at the end of their useful life in vehicles. The new pilot hopes to develop a “closed-loop” raw material cycle that would have new batteries made from old batteries without the need for new, high carbon cost mineral mining.
With this new initiative, Porsche engineers hope to address the growing importance of recycled battery raw materials and promote the responsible handling of high-voltage batteries at the end of life.
In the long term, a recycling network for EV batteries is planned to be established in collaboration with external partners.
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“With the help of innovative recycling processes, we strive to increase our independence from volatile and geopolitically unstable raw material markets,” says Barbara Frenkel, Executive Board Member for Procurement at Porsche. “Circular Economy is a core pillar of our sustainability strategy, and with this pilot project, we want to underscore our ambitions.”
Three phase plan
“Second Life” concept uses EV batteries as backup power; via Porsche.
Porsche is advancing its commitment to sustainability by embracing the principles of, “reduce, reuse, recycle.” The company is developing more efficient electric vehicles with longer-lasting batteries, which are repurposed in “Second Life” Battery Energy Storage Systems (BESS) like the one implemented at its Leipzig plant (above). Now, through a new closed-loop recycling pilot, Porsche is emphasizing that “recycle” part by approaching the project in three phases.
In the first project phase, EV batteries from development vehicles are mechanically shredded at the end of their use-phase and processed into “black mass” that contains valuable raw materials like nickel, cobalt, manganese, and lithium. So far, the program has produced about 65 tons of processed black mass.
In the next phase, the black mass is further separated and refined until the materials reach both the levels of quality and purity Porsche demands from the “virgin” materials it buys for its new batteries.
In the third phase, Porsche takes the raw materials recovered from its decommissioned high-voltage batteries and makes new batteries with them, demonstrating Porsche’s, “holistic understanding of the circular economy.”
Porsche hopes its new pilot will help prepare the company for upcoming regulatory changes – for example, the expected requirements for batteries in the European Union by 2031. By adopting recycled materials early, the company says it intends to make an active contribution to the technology while further reducing its environmental impact.
New 5-passenger G30Es electric golf cart (right); via Yamaha.
Yamaha has announced plans to launch a pair of new five-seater electric golf carts featuring new lithium-ion batteries and vehicle control units developed in-house this June. The launch is scheduled to coincide with the company’s 50 year anniversary in the golf car/golf cart business.
Yamaha Motor launched its first golf cart, the YG292 “Land Car,” in June 1975. That original golf cart was powered by the company’s air-cooled, 292cc 2-stroke snowmobile engine, while its fiber-reinforced plastic (FRP) composite bodywork was developed using the companies maritime and boat-building expertise.
The in-house developed batteries use lithium iron phosphate (LFP) chemistry in their cells, with the company claiming higher levels of reliability and an extended lifespan compared to other battery chemistries it’s worked with. The Yamaha batteries are available in both 4 kWh and 6 kWh capacities, enabling buyers to tailor their choice based on their individual driving range requirements, course conditions, and individual play/mobility preferences.
Both new models are 144.5″ (367 cm) long and 49.5″ (125 cm) wide, with an 84.25″ (214 cm) wheelbase, and are powered by an AC motor with, “superior speed and torque control, combined with optimized regenerative braking and a brushless design,” that, according to Yamaha, give the brand’s new golf carts far greater efficiency than the company’s previous models, resulting in 30% better efficiency.
You can check out more detailed pictures of the Yamaha-developed parts and full specs, below, then let us know what you think of the tuning fork brand’s newest mobility products in the comments.