Europe’s Heatwave Is Hitting Refineries And Power Supplies
Diesel Exports Hit Record High as Domestic Stockpiles Slide Alex Kimani is a veteran finance writer, investor, engineer and researcher for Safehaven.com.
Extreme heatand drought are beginning to impair Europe’s energy system.
Refineries are losing cooling efficiency, river levels are forcing cuts to nuclear generation, hydroelectric output is falling and inland fuel transport is becoming more expensive as barges carry smaller cargoes.
Temperatures above 40°C have become increasingly common across large parts of southern and central Europe, with prolonged drought shrinking rivers, drying soils and fueling destructive wildfires.
A recent analysis by theWorld Weather Attributiongroup concluded that human-driven climate change has substantially increased both the likelihood and intensity of these extreme weather events, turning seasonal heat into a recurring operational constraint for Europe’s oil and power sectors.Heat and drought conditions across Europe are intensifying the pressure on a market alreadystruggling with disruptions to crude oil supply thanks to the ongoing Middle East conflict.
Historically, seasonal changes in temperatures have affected energy prices across the continent as heating and cooling demand fluctuates; however, commodity analysts at Standard Chartered have noted that extreme heat and drought are now affecting refiners’ ability to produce fuels efficiently, meaning that climate is simultaneously raising demand and constraining supply.
Related: Germany’s Energy Demand Falls as High Prices Hit Oil Consumption Although each individual effect may be relatively small, StanChart says that the combination is amplifying pressure on refinery margins and diesel cracks during the summer months.
The ICE gasoil-Brent crude crack (which reflects European diesel) exceeded $75 per barrel (bbl) on 31 July, close to a 20-year high, with further upside possible if conditions worsen.
Europe's refinerieswere mainly builtin the 1960s and 1970s, and are optimized for cold and sub-zero temperatures thus leaving them poorly equipped for modern summer heatwaves.
Refineries rely heavily onair fin coolersto condense and cool hot hydrocarbon streams.
As the ambient air temperature approaches the target temperature of the process stream, the temperature differential drops, severely reducing heat transfer efficiency.
Water-cooled systems face a double crisis during heatwaves.
| Product | Price | Change |
|---|---|---|
| Brent Crude | $102.14/bbl | +0.34% |
| WTI Crude | $96.90/bbl | +0.21% |
| EN590 Diesel | $846/MT | +0.18% |
| Jet Fuel A-1 | $1090/MT | +0.55% |
| Mazut M100 | $450/MT | -0.15% |
| Bitumen 60/70 | $470/MT | +0.08% |
| Sulphur Gran 99.5% | $470/MT | -0.44% |
| Urea 46% Gran | $650/MT | +1.12% |
| NPK 16-16-16 | $460/MT | -0.28% |
| Nat Gas TTF | $15.42/MMBtu | +0.92% |
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