Tuesday, November 6, 2007

The Commodity Is Energy Not Oil

The excerpts below from an article in Bloomberg, is a study in the price of oil versus the price of energy. People need to think of energy as the commodity and not oil. Actually there are two energy commodities: stationary energy (for example, power plant energy) and transportation energy (cars, trucks, etc.). Also in spite of environmental concerns the demand for coal is increasing at quite a clip due to the economic growth in Asia. The text in bold is my emphasis.

Now that the price of coal is at a historic low relative to oil, there's no stopping consumers and producers alike from embracing Al Gore's nightmare.

A ton of U.S. coal is so cheap at about $47 that European utilities will pay $50 to ship it across the Atlantic, according to Galbraith's Ltd., a 263-year-old London shipbroker. While oil and coal cost the same as recently as 1998, West Texas Intermediate crude is five times more expensive after climbing to a record $96.24 on Nov. 1.

Peabody Energy Corp., Consol Energy Inc. and Arch Coal Inc., the three biggest U.S. coal companies, forecast the largest increase in exports in 20 years . . . . Coal use worldwide has grown 27 percent since 2002, three times faster than crude, said BP Plc. U.S. East Coast coal has risen 71 percent, while oil tripled on the New York Mercantile Exchange.

U.S. coal prices are equal to $1.98 for each million British thermal units of energy, compared with $12.51 for fuel oil and $6.91 for natural gas, data compiled by Bloomberg show. A million British thermal units is the equivalent of eight gallons of gasoline.

``There is a huge advantage with coal, and this will continue indefinitely,'' said Gianfilippo Mancini, the head of fuel purchasing for Enel SpA, Italy's largest power company, which is spending 4 billion euros ($5.8 billion) to convert oil-fed plants to run on coal.

U.S. coal exports to Europe for the first nine months of this year were 11.4 million tons, up 15 percent from the same period in 2006, according to the U.S. Energy Department. Coal generates 41 percent of the world's man-made carbon dioxide emissions, blamed for the warming of the Earth's climate, Gulf of Mexico hurricanes and rising sea levels.

More than 1,000 coal-fed power plants will be built in the next five years, mostly in China and India, according to the U.S. Department of Energy. China, the world's biggest coal producer, became a net importer for the first time this year, taking supplies from Indonesia, Australia and South Africa and reducing the amount available for Europe.

``If those 1,000 plants get built without any controls on carbon emissions, we will careen into unmanageable changes in our climate,'' the 63-year-old Holdren said in an interview. ``We need to motivate carbon capture and storage through policy. We will still be using coal, but in much smarter ways. It doesn't have to be an economy buster.''

India needs to add 40,000 megawatts a year, or 30 percent of current capacity, to maintain its 8 percent economic growth, said Jayarama Chalasani, director at Mumbai-based Reliance Energy Ltd., India's second-biggest utility.

No comments:

Post a Comment