Welcome back to the energy crisis!
It was put on hiatus for the past few years as the globe’s gears grinded thanks to a greedy-banker-induced recession.
But it’s back — with a vengeance.
And it isn’t just oil (though we did recently discuss how the world will need 90 million barrels per day next year, but has never pumped more than 74 million barrels per day)…
Energy weaknesses are being pointed out in many links of the chain.
Here in Maryland, and up and down the Atlantic Coast, 1.2 million homes were without power — some for more than a week — after intense overnight storms earlier this month.
The death toll rose to 26 as 106 degree heat turned homes into ovens.
The local utility was then forced to cycle electricity to keep up with demand as temperatures sweltered again mid-month.
In June, the Texas grid set a usage record requiring 65,047 megawatts at one point — nearly 2,000 MW more than the previous record. The Electric Reliability Council of Texas (ERCOT) warned of broad rolling outages.
World’s Biggest Blackout
But that’s nothing compared to what’s happening this week in Asia.
Here’s the first line of an AP report out of India:
NEW DELHI (AP) – India’s energy crisis cascaded over half the country Tuesday when three of its regional grids collapsed, leaving 620 million people without government-supplied electricity for several hours in, by far, the world’s biggest blackout.
Trains didn’t run and dim traffic lights caused gridlock. Crematoria stopped operating with bodies half burnt.
Think about it… more than twice the population of the United States without power.
And it’s not the first time it happened.
The day before 620 million people lost power, the Indian grid failed in the northern part of the country, leaving more than 300 million in the dark.
As the AP reports:
India’s demand for electricity has soared along with its economy in recent years, but utilities have been unable to meet the growing needs. India’s Central Electricity Authority reported power deficits of more than 8 percent in recent months.
And that’s with only two-thirds of the country hooked up to the grid…
The country of 1.2 billion is hungry for any and all energy it can get.
False Prophets
You might read this week that Saudi oil production is on track for record output this year. And it is.
The country is pumping out 10 million barrels per day.
But this is an emperor-has-no-clothes situation. They’re pumping record amounts of crude, but can’t even keep the lights on at home.
While production is up, so is domestic consumption.
The Kingdom is burning one million barrels per day to produce electricity — up from 800,000 last year.
What you won’t read about is the energy shortage protests in Saudi streets occurring this week.
The head of the Saudi Electricity Company said this week that “consumption has remarkably increased since the beginning of Ramadan by 8 percent. Protesters made it difficult for technicians to fix the failure.”
Many neighborhoods have been suffering daily power outages starting at dawn.
So record production in Saudi Arabia is only half the story.
Indeed, a news search for “energy shortages” this week will bring results from Cuba, Pakistan, Lebanon, Japan, and more…
All Systems Go
So what is record production if the country producing it can’t keep its lights on?
It’s a ruse.
The world still needs and will continue to need every megawatt it can get.
The Saudis, for example, have already committed $109 billion to get one-third of their electricity from solar, and are putting another $100 billion into nuclear.
Allow me to indulge you with a hearty clip from United Press International:
The Saudis have built a foreign assets cushion of around $500 billion from oil exports. It has used this immense wealth to buy its way out of trouble; for instance, heading off pro-democracy protests with massive social spending in recent years.
But, the Middle East Economic Digest observed, “a more serious set of challenges now faces the kingdom that threaten to be even more destabilizing.
“Inefficient and wasteful energy consumption, coupled with a rising population, is leading the kingdom to burn even more of its natural resources at home rather than selling them abroad and adding to the proceeds of the half-trillion-dollar cash pile.
“Unless action is taken, the kingdom could find it needs the oil price to be $320 a barrel by 2030 just to balance the budget,” the weekly, published in the United Arab Emirates, warned.
Nuclear power is seen as the solution. But, as MEED stressed, “time is of the essence.”
In 2010, the King Abdallah Center for Atomic and Renewable Energy, known as KAcare, was established to oversee the gulf state’s nuclear program under its president, Hashim bin Abdullah Yamani, who was accorded ministerial powers.
KAcare consultant Ibrahim Babelli said in 2010 it took 3.4 million barrels of oil equivalent a day (known as boe/d) to power electricity generation. This is expected to more than double by 2028 to 8.3 million boe/d.
This is crucial, as the Saudis are driving to build an industrial infrastructure to sustain the economy when the oil fields run down. Some have already begun to decline.
For total reliance on nuclear power, Babelli says, 40-60 reactors would be needed by 2030. That’s four-six reactors per year from 2020.
“That’s stretching it,” he said. “The answer is an energy mix.”
Folks, the energy race is back on.
Don’t believe me?
Remember how we have all that shale gas — a supposed 100-year supply — and how prices were going to remain low for years…
Natural gas prices are up 45% for the summer.
The world’s going to need all it can get.
Call it like you see it,
Nick Hodge
@nickchodge on TwitterNick is the founder and president of the Outsider Club, and the investment director of the thousands-strong stock advisories, Early Advantage and Wall Street’s Underground Profits. He also heads Nick’s Notebook, a private placement and alert service that has raised tens of millions of dollars of investment capital for resource, energy, cannabis, and medical technology companies. Co-author of two best-selling investment books, including Energy Investing for Dummies, his insights have been shared on news programs and in magazines and newspapers around the world. For more on Nick, take a look at his editor’s page.
