Blackouts in Texas and Mexico: Another Threat?

Blackouts in Texas extend their presence in the Aztec country. Blackouts that continue to widen the high bill that COVID19 leaves in companies.

Immersed in a scenario of exceptional uncertainty, meteorological phenomena, which show for many citizens and leaders in the world the climate change that the planet is experiencing, once again put the economy in check. If a few weeks ago we talked about how oil, and the continued rise in energy prices, could jeopardize the recovery (here), the heavy snowfalls in Texas, which have left millions in losses in many companies both in the United States as well as from its neighboring country, Mexico, they once again weigh down a recovery that, in the face of all these events, seems unattainable.

In a scenario in which vaccines, as well as the lower incidence of the virus, was allowing the resumption of economic activity in those countries that had been forced to close down, blackouts, as happened in its day with the virus and With social distancing measures, they once again paralyze economic activity in many parts of the country, as well as in the neighboring country.

And, even if we only talk about the paralysis of Texas, we must know that said state is positioned as the largest energy producer in the entire country. Only the state of Texas, according to data provided by the International Energy Agency (IEA), produces 41% of oil production in the country. Along the same lines, Texas produces 25% of the natural gas produced in the United States, as well as about 28% of wind energy.

This capacity that Texas has, doubling the energy production produced by Florida, the second state in the ranking, led the state to apply a regulation that would isolate its electricity grid from that of the country. A deregulation that, although it favored consumers on dates in which production satisfies demand, in the same way causes a strong increase in costs when demand remains constant, or increases, but supply, for the reason whatever, it cannot be increased. A situation that we have reached at the moment, with strong waves of cold that, having triggered demand, have disabled the production plants; in this way, leaving many companies without supply and, therefore, without the ability to operate.

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Blackouts cause millions in losses

What happened in Texas, taking into account all the damages, as well as other costs that will have to be faced, represent, de facto, an expense of more than 50,000 million dollars for the Anglo-Saxon country. Given this situation, Joe Biden has already spoken out publicly and declared a state of emergency in the state. Thanks to this, capital will be mobilized from the state budget to face this situation. Well, we are talking about the snowfall that occurred here affected more than half a million homes in the country, with the consequences that this situation has for them.

In addition, this inability to supply energy to the companies of the state itself, as well as to those of those countries that, like Mexico, import the energy of this state, has ended up causing millions in losses for all these entrepreneurs. Millionaire losses that are added to those that they already registered due to the inability to generate economic activity in a scenario in which the virus prevented any social contact. Well, we are talking about a situation in which companies continue to expand the bill left by COVID, with phenomena that, like the present, continue to weigh down and compromise the weakened financial situation that many companies present due to the inability to operate normally in months past, and today.

However, we must know that these losses also extend to the neighboring country, which is highly dependent on energy from the United States. In this sense, Mexico is one of the main natural gas buyers for the United States. A natural gas that is used to generate around 60% of the country’s energy, taking into account that 80% comes from the United States, from the producing fields of Texas. As we can see, a dangerous dependence that leaves a country out of the game that, unlike the United States, cannot support, in the same way, citizens and companies affected by the storm.

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And we are not talking, precisely, of slight losses. Thus, the estimated losses, only for industry and manufacturing in Mexico, for every hour that they do not have electricity supply, amount to more than 200 million dollars. If we take into account the accumulated losses until Tuesday, these amounted to more than 2.7 billion dollars. To this we must add that, for each day that passes, they must pay more than 68 million dollars in salaries that are not profitable due to blackouts. And we are only talking about one sector, because when the analysis is extrapolated to other sectors such as the automotive industry, precisely an industry that contributed to the economic boost that the country experienced after the confinement, the losses due to the stoppage of production are devastating.

Is an energy transition necessary?

In recent months, and especially since the beginning of the pandemic, a debate has come to the fore again that, for years, has been brewing in public institutions and the main think tanks and universities. The energy transition, as a tool to transform the economy, seems to be one of the main objectives to be met in the coming years. A debate that returns to the public rostrum, given the latest events that the planet is experiencing, and the consequences that these are having on the territory, on the population, as well as on companies.

Thus, the meteorological phenomena that claim to show an increasingly pronounced climate change seem to be having an effect on the thinking of the main rulers on the planet. Joe Biden himself, for example, after being invested as the new president of the United States, was one of the first leaders who, in the current scenario, proposed to initiate said transition and join the treaty that recently left the country in the hands of Donald. Trump, trying to mitigate the effects of a climate change that his predecessor could not, or did not want, to listen to.

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However, and like his predecessor, many are the leaders who see this transition as a risk for the population. Blackouts in Texas, the nation’s leading oil and gas producer, have generated tension between Republicans and Democrats. Also in Mexico, where Andrés Manuel López Obrador (for its acronym, AMLO) and the opposition debate the causes of said blackouts. And is that, waiting to know what really happened, many are the rulers who have used these blackouts to question the ability of these clean fuels to replace the traditional ones.

In summary, what happened in Texas is proof that, as with the pandemic, the lack of foresight entails associated costs. We can move towards a new energy model, and Texas, being the country’s energy superproducer, is an example of this. However, his lack of foresight and preparation has ended up leading to a situation of disability. In this context, a deterioration is accentuating which, if this continues, could make this recovery a later recovery.

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