US oil prices rise as winter weather hits Texas
New York (CNN Business)Ford is shutting its Kansas City assembly plant, which makes its best-selling F-150 pickup, because of a shortage of natural gas caused by severe winter weather hitting much of the country.
“To ensure we minimize our use of natural gas that is critical to heat people’s homes, we decided to cancel operations for a week, beginning Saturday, February 13,” Ford said in a statement. “We expect to return to normal operations on Monday, February 22.”
About 200 million people were under some sort of weather-related alert Tuesday as a winter storm pummeled much of the United States. After hitting Texas and Oklahoma especially hard, the storm was expected to move out through the Northeast late Tuesday, leaving a trail of heavy snow and ice in its path, CNN Meteorologist Tyler Mauldin said.
Oil and natural gas prices rose sharply this week as the storm disrupted normal operations in the Permian Basin, the fracking capital of the United States. The price of natural gas jumped more than 5% Tuesday.
General Motors confirmed that it canceled the first shift at four plants Tuesday, but that was due to the weather and not a shortage of natural gas. The plants are located in Spring Hill, Tennessee; Ft. Wayne, Indiana’ Bowling Green, Kentucky; and Arlington, Texas. The company said it would make a decision on the second shift later Tuesday, based upon local weather conditions. Stellantis, the new name of the company previously known as Fiat Chrysler, confirmed it shut its Toledo, Ohio, Assembly plant, also due to weather.
Other automakers are likely to see their operations disrupted as well, according to industry sources. But the other automakers did not immediately respond a request for comment.
The temporary shutdown is the just the latest problem for Ford and other automakers that have been hit by a shortage of computer chips that is slowing production.
Ford (F) said earlier this month it expects to lose 10% to 20% of its planned first quarter production, and that if the shortage extends through the first half, it could cost between $1 billion and $2.5 billion in lost earnings for the year. GM estimates the chip shortage will cost it between $1.5 billion and $2 billion.
Automakers cut back computer chip orders early last year when the pandemic caused temporary plant closures and slammed the brakes on auto sales and production. Electronics manufacturers, which had strong sales during the pandemic, happily snapped up the excess supply.
But when car sales bounced back sooner than expected, it left the industry struggling with a chip shortage.
Because of the shortage, automakers have been directing the supply of chips they do have to their most profitable and best-selling products such as pickups and large SUVs. In Ford’s case, that’s the the F-150 pickups. Until now, Ford’s Kansas City plant, which also makes the Transit commercial van, has been spared shutdowns.
The GM (GM) plant in the Kansas City area, its Fairfax Assembly plant, was already temporarily shut through at least mid-March by the chip shortage. It normally makes the Cadillac XT4 small SUV and Chevrolet Malibu sedan.
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