The European energy crisis created by shortsighted green energy policies now is spreading across the globe and is even testing us here at home in the United States, states Phil Flynn of PRICE Futures Group.

Not only are we facing a diesel shortage but the tightness of the supply of natural gas is causing some parts of the country to get warnings of possible power outages as we head into winter.

The Wall Street Journal reports, “New England power producers are preparing for the potential strain on the grid this winter as a surge in natural-gas demand abroad threatens to reduce supplies they need to generate electricity." New England, which relies on natural-gas imports to bridge winter supply gaps, is now competing with European countries for shipments of liquefied natural gas, following Russia’s halt of most pipeline gas to the continent. Severe cold spells in the Northeast could reduce the amount of gas available to generate electricity as more of it is burned to heat homes. The region’s power-grid operator, ISO New England, Inc., has warned that an extremely cold winter could strain the reliability of the grid and potentially result in the need for rolling blackouts to keep electricity supply and demand in balance. According to the Journal, the warning comes as executives and analysts predict power producers could have to pay as much as several times more than last year for gas deliveries if severe weather happens.

It is apparent that the movement to green energy is not ready for prime time. It’s left the world severely vulnerable economically and geopolitically. Yet the Biden administration continues to double down on its bad green energy policy. The Biden administration made it very clear that they have an adversarial relationship with US oil and gas and has done everything from accusing them of being war profiteers, price gougers, and market manipulators. They view US oil and gas as the enemy. Because of that, they decided to depend on OPEC to fill the void in the global market when the obvious answer was to embrace US oil and gas. The administration refused to do so, and it’s left egg on their faces.

The Biden administration’s desire to reach out to the Iranian regime and attempt to lift sanctions on the country and get them back into the ill-fated Iranian nuclear deal looks like another diplomatic misstep. Even Barak Obama is suggesting that his administration failed when they didn’t back the Iranian green revolution.

Now come reports that Iran is actively helping Russia in its war in Ukraine by supplying them with weapons and drones. Instead of the Biden administration taking a tough stance on Iran, they instead are taking a tougher stand on Saudi Arabia which they accused of helping Russia because they failed to keep their calls to raise production ahead of the US midterm elections. Biden chose Iran over Saudi Arabia. They came into office with a plan to sour relations with our long-term ally Saudi Arabia. Yet that strategic decision is causing even more consternation in the global markets. The Biden administration asked the cartel to put off their recent production cut until after the midterm elections for obviously political purposes. When the cartel failed to bend to their wishes, Biden and his administration threw a fit. They threaten to change our country’s long-term relationship with Saudi Arabia forever by withdrawing US weaponry. So, the Biden administration wants to create another enemy in the Middle East at a time when the world is already on the verge of nuclear war. OPEC members are jumping to the defense of Saudi Arabia saying that they were never coerced by Saudi Arabia to cut production.

Reuters reports that “OPEC+ member states lined up on Sunday to endorse the steep cut to its output target agreed this month after the White House, stepping up a war of words with Saudi Arabia, accused Riyadh of coercing some other nations into supporting the move. The United States last week said the cut would boost Russia’s foreign earnings and suggested it had been engineered for political reasons by Saudi Arabia, which on Sunday denied it was supporting Moscow in its invasion of Ukraine." Saudi King Salman bin Abdulaziz said the kingdom was working hard to support stability and balance in oil markets, including establishing and maintaining an agreement of the OPEC+ alliance that comprises the Organization of the Petroleum Exporting Countries (OPEC) and other major producers including Russia.

Yet the Biden foreign policy can only be described as a disaster. Not only do we have a war in Ukraine, but we also have the threat of nuclear war breaking out. Iran has become emboldened under Biden’s weak policy and has played the administration along with regard to the song and dance about rejoining the flawed Iranian nuclear deal that they never had plans to adhere to in the first place. They chose Iran over our longtime ally Saudi Arabia which is Iran’s enemy and is giving Iran more power in the region. Voters in the United States feel the impact of these bad policies every time they go to fill up the gas tank or when they must pay their heating bill.

That in and of itself is going to be a challenge for the Energy Information Administration in their “Winter Fuels Outlook”. They are reporting that heating your home with natural gas will be 28% higher than it was a year ago. If winter is 10% colder than normal that jumps to 51% higher than a year ago and the story is not that much better for heating oil. The EIA says they expect that consumers will pay 27% more on their electric heating bill than they did last year. If we have a colder-than-normal winter, it will be 37% higher if you’re heating with electricity. So, expect to pay 10% more than you did a year ago and if it’s colder than normal it could be 20% more. Propane prices are expected to be 5% more than a year ago but if we get a colder-than-normal winter that could jump to 30% more.

The sad part about this is that a lot of it was avoidable. Some of the issues as far as lack of capital spending and poor planning on the green energy movement, took years to create. Shorter-term decisions by governments such as killing pipelines, restricting drilling, and restricting investment, sent a dangerous signal to the market that’s leaving the US undersupplied.

In the short term, we’re going to see continued volatility as the market tries to balance shortages of supplies with the potential economic slowdown caused by a possible looming recession and higher interest rates. Recession fears prevail but we still think the risk is ultimately going to be on the upside. We do not think the demand destruction is going to be sufficient enough to keep prices low forever. In the short term, be prepared for volatility.

Natural gas is under a lot of pressure because of the short-term weather outlook and seasonal maintenance. We still believe that there’s significant upside risk as we get into winter, but we have to start seeing the cold weather set in.

Learn more about Phil Flynn by visiting Price Futures Group.