Power costs are rising as hundreds of thousands of individuals in Texas are left with out electrical energy

Pump jacks work in front of a drilling rig in an oil field in Midland, Texas.

Nick Oxford | Reuters

Energy prices rose Tuesday as a cold spell in the south increased demand for fuel while hampering production.

According to poweroutage.us, more than 3.8 million people in Texas were without power on Tuesday morning as the power grid couldn’t keep up with increased demand and in some cases, utility companies were forced to implement rolling power outages.

“Most of the heating needs are met by the electrical baseboard of heat pumps in the southern region,” said John Kilduff, founding partner of Again Capital. “The demand for electricity over the weekend was comparable to the highest summer heat waves.”

Henry Hub natural gas futures rose 6.7% to trade at $ 3.106 per million British thermal units. The gasoline futures gained more than 4%.

“The storm that crippled the Midwest and Northeast was much worse than expected,” said Jeff Kilburg, CEO of KKM Financial. “Frigid temps and speculators that are running low are driving futures prices up dramatically.”

According to estimates by ClearView Energy Partners, the storm blocked about 30 gigawatts of generating capacity as consumers increased demand for heating for their homes. Ultimately, there just wasn’t enough supply, forcing energy companies to turn to the free market to buy electricity.

“The weather is bad enough to throttle supply when demand is close to an all-time high. Certain regional spot prices for natural gas have increased 10 to 100 times within a few days,” said analysts at RBC.

West Texas Intermediate crude oil futures, the US oil benchmark, broke above $ 60 for the first time in more than a year on Monday, despite trading below that level on Tuesday morning. Brent crude, the international oil benchmark, fell 21 cents to $ 63.09 a barrel.

The generation of units across different fuel types – including some wind production – has been taken offline, and the freezing of pipelines implements the flow of natural gas and crude oil. Texas is the largest producer of crude oil and natural gas in the US and has 30 refineries, according to the US Energy Information Administration.

“The new outages will limit the supply of refined fuels as it has now reached more than 3 million barrels of capacity,” said Paola Rodriguez Masiu, vice president of oil markets at Rystad Energy.

“About 2.5 million bpd capacity has been closed between Houston and Louisiana, including the Motiva Enterprises 600,000 bpd facility,” she added, referring to the measurement of barrels per day.

The energy sector gained more than 2% during premarket trading on Tuesday. Occidental Petroleum was up 6% in premarket trading, while Exxon, Devon Energy, Halliburton and ConocoPhillips were up more than 2%.

On Sunday, President Joe Biden declared a state of emergency in Texas when the storm brought snow and ice from Arkansas to Indiana. The storm is expected to move from the Ohio Valley via Pennsylvania to Maine, according to the National Weather Service.