GIULIETTA TALEVI: Load-shedding hits Texas (did Eskom emigrate?)
Can you say “load-shedding”, but with a Texan drawl?
There’s nothing quite like a little schadenfreude to keep the home fires burning, but the scale of the power system collapse in Texas, a state almost half the size of SA, is quite a thing to behold.
To put it in perspective, as the Financial Times (FT) writes in this article, the hole in the US state’s power supply of 45GW “was more than the entire capacity of Sweden, and 11GW deeper than the day before. It compared with the 83GW in generating capacity that [it] had reported when winter began.”
So what on earth went wrong that led to millions of people being plunged into freezing darkness since Monday night — in the midst of one of the worst winter storms to have hit Texas in years?
Well, as this Bloomberg article helpfully articulates: basically everything, and all at once.
“As the hours ticked by and millions more were plunged into frozen darkness, a more sober reality emerged. The greatest forced blackout in US history, as this event has almost certainly become, was the result of a systemic and multifaceted failure.”
It goes on to say that many power plants weren’t able to cope with the weather, which wiped out generation capacity. “The ones that were still standing struggled to get enough fuel, with shale wells experiencing so-called freeze-offs. Many wind turbines stopped spinning. Texas, with a grid notoriously isolated from the rest of the US, was unable to call on neighbouring states for help.”
In short, a cluster-whatsy of epic proportions.
The interesting thing about Texas is that it doesn’t suffer the same lack of choice that has SA in a chokehold to Eskom. In fact, Texas boasts more than 70 electricity providers, which means consumers are spoilt for choice.
Back here, however, our monopoly provider is about to push through a 15% tariff hike — and in the absence of competition, there’s almost nothing we can do about it.
Speaking of Texas, which is better known for big steaks, big Stetsons and Big Oil, the FT has an interesting analysis on whether oil is set for a new super-cycle, as two investment banks — JPMorgan Chase and Goldman Sachs — believe.
Goldman, you may recall, has been on the wrong side of this punt before. Famously, back in May 2008 the bank declared that Brent crude prices could hit $200 a barrel within two years as supplies dwindled. This was, as it turned out, horrendously off-course: while oil did rally above $125 a barrel for another month or so, it collapsed within a year.
Between 2010 and 2014, Brent crude then staged a recovery, before dwindling to a low of $35 a barrel by February 2016.
Then, almost a year ago, as panic spread over a new virus called Covid-19, oil prices suffered a historic rout. On April 20 last year West Texas Intermediate (WTI) crude fell 300% to trade at a negative $37 a barrel. Remember that? Crazy times.
Now, with Brent crude prices back at $64 a barrel and WTI at about $60, the investment banks say oil prices could return to about $100, “predicated on the belief that fiscal stimulus will boost consumption just as investment in new production has been sucked out of the industry,” in the FT’s words.
That’ll be great news for Sasol, whose shares have staged a stonking recovery in recent times, climbing 77% in the past three months.
It’s less fantastic for everyone else — including our monstrously mismanaged Eskom, which is always an open-cycle gas turbine away from the sort of rolling blackouts now sweeping America.
Careful, as they say, what you wish for.
*Talevi is the FM's Money & Investing editor.
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