Best of the Week
Most Popular
1. Gold vs Cash in a Financial Crisis - Richard_Mills
2.Current Stock Market Rally Similarities To 1999 - Chris_Vermeulen
3.America See You On The Dark Side Of The Moon - Part2 - James_Quinn
4.Stock Market Trend Forecast Outlook for 2020 - Nadeem_Walayat
5.Who Said Stock Market Traders and Investor are Emotional Right Now? - Chris_Vermeulen
6.Gold Upswing and Lessons from Gold Tops - P_Radomski_CFA
7.Economic Tribulation is Coming, and Here is Why - Michael_Pento
8.What to Expect in Our Next Recession/Depression? - Raymond_Matison
9.The Fed Celebrates While Americans Drown in Financial Despair - John_Mauldin
10.Hi-yo Silver Away! - Richard_Mills
Last 7 days
Is Natural Gas Price Ready For An April Rally? - 8th Apr 20
Market Predictions And The Business Implications - 8th Apr 20
When Will UK Coronavirus Crisis Imrpove - Infections and Deaths Trend Trajectory Analysis - 8th Apr 20
BBC Newsnight Focuses on Tory Leadership Whilst Boris Johnson Fights for his Life! - 8th Apr 20
The Big Short Guides us to What is Next for the Stock Market - 8th Apr 20
USD Index Sheds Light on the Upcoming Gold Move - 8th Apr 20
The Post CoronaVirus New Normal - 8th Apr 20
US Coronavirus Trend Trajectory Forecast Current State - 7th Apr 20
Boris Johnson Fighting for his Life In Intensive Care - UK Coronavirus Crisis - 7th Apr 20
Precious Metals Are About To Reset Like In 2008 – Gold Bugs, Buckle Up! - 7th Apr 20
Crude Oil's 2020 Crash: See What Helped (Some) Traders Pivot Just in Time - 7th Apr 20
Was the Fed Just Nationalized? - 7th Apr 20
Gold & Silver Mines Closed as Physical Silver Becomes “Most Undervalued Asset” - 7th Apr 20
US Coronavirus Blacktop Politics - 7th Apr 20
Coronavirus is America's "Pearl Harbour" Moment, There Will be a Reckoning With China - 6th Apr 20
Coronavirus Crisis Exposes Consequences of Fed Policy: Americans Have No Savings - 6th Apr 20
The Stock Market Is Not a Magic Money Machine - 6th Apr 20
Gold Stocks Crash, V-Bounce! - 6th Apr 20
How Can Writing Business Essay Help You In Business Analytics Skills - 6th Apr 20
PAYPAL WARNING - Your Stimulus Funds Are at Risk of Being Frozen for 6 Months! - 5th Apr 20
Stocks Hanging By the Fingernails? - 5th Apr 20
US Federal Budget Deficits: To $30 Trillion and Beyond - 5th Apr 20
The Lucrative Profitability Of A Move To Negative Interest Rates - Pandemic Edition - 5th Apr 20
Visa Denials: How to avoid it and what to do if your Visa is denied? - 5th Apr 20 - Uday Tank
WARNING PAYPAL Making a Grab for US $1200 Stimulus Payments - 4th Apr 20
US COVID-19 Death Toll Higher Than China’s Now. Will Gold Rally? - 4th Apr 20
Concerned That Asia Could Blow A Hole In Future Economic Recovery - 4th Apr 20
Bracing for Europe’s Coronavirus Contractionand Debt Crisis - 4th Apr 20
Stocks: When Grass Looks Greener on the Other Side of the ... Pond - 3rd Apr 20
How the C-Factor Could Decimate 2020 Global Gold and Silver Production - 3rd Apr 20
US Between Scylla and Charybdis Covid-19 - 3rd Apr 20
Covid19 What's Your Risk of Death Analysis by Age, Gender, Comorbidities and BMI - 3rd Apr 20
US Coronavirus Infections & Deaths Trend Trajectory - How Bad Will it Get? - 2nd Apr 20
Silver Looks Bearish Short to Medium Term - 2nd Apr 20
Mickey Fulp: 'Never Let a Good Crisis Go to Waste' - 2nd Apr 20
Stock Market Selloff Structure Explained – Fibonacci On Deck - 2nd Apr 20
COVID-19 FINANCIAL LOCKDOWN: Can PAYPAL Be Trusted to Handle US $1200 Stimulus Payments? - 2nd Apr 20
Day in the Life of Coronavirus LOCKDOWN - Sheffield, UK - 2nd Apr 20
UK Coronavirus Infections and Deaths Trend Trajectory - Deviation Against Forecast - 1st Apr 20
Huge Unemployment Is Coming. Will It Push Gold Prices Up? - 1st Apr 20
Gold Powerful 2008 Lessons That Apply Today - 1st Apr 20
US Coronavirus Infections and Deaths Projections Trend Forecast - Video - 1st Apr 20
From Global Virus Acceleration to Global Debt Explosion - 1st Apr 20
UK Supermarkets Coronavirus Panic Buying Before Lock Down - Tesco Empty Shelves - 1st Apr 20
Gold From a Failed Breakout to a Failed Breakdown - 1st Apr 20
P FOR PANDEMIC - 1st Apr 20
The Past Stock Market Week Was More Important Than You May Understand - 31st Mar 20
Coronavirus - No, You Do Not Hear the Fat Lady Warming Up - 31st Mar 20
Life, Religions, Business, Globalization & Information Technology In The Post-Corona Pandemics Age - 31st Mar 20
Three Charts Every Stock Market Trader and Investor Must See - 31st Mar 20
Coronavirus Stocks Bear Market Trend Forecast - Video - 31st Mar 20
Coronavirus Dow Stocks Bear Market Into End April 2020 Trend Forecast - 31st Mar 20
Is it better to have a loan or credit card debt when applying for a mortgage? - 31st Mar 20

Market Oracle FREE Newsletter

Coronavirus-stocks-bear-market-2020-analysis

War On Coal And Coal's Game Changer

Commodities / Gold and Silver 2012 Nov 11, 2012 - 10:31 AM GMT

By: Andrew_McKillop

Commodities

Best Financial Markets Analysis ArticleMurray Energy Corp. and all other US coal producers have been forced to shut mines and fire thousands of workers in 2012 as they cut their output by tens of millions of tons every quarter, in the face of weaker demand and ever-lower prices. Coal used in the US for power stations which are increasingly moving to burning natural gas has reduced US total coal demand by more than 20% in one year. If this trend continues, and Obama further tightens the screw on coal, India will replace the US as the world's second-biggest coal burner, by 2015 or sooner.


Murray Energy's latest round of job cuts were explained this way: “The decision to lay people off was difficult and complicated. First the Obama Administration’s War on Coal has already destroyed coal markets and resulted in the need for some layoffs,” and “Second, the layoffs were more severe due to the anticipation of further damage to coal markets caused by the Obama Administration’s disastrous War on Coal”, wrote Gary Broadbent, Murray Energy spokesman, in a corporate e-mail, 9 November.

CEO Robert Murray went further: he read a prayer to workers asking God’s forgiveness for “decisions that we are now forced to make to preserve the very existence of any of the enterprises that you have helped us build”. Coal prices for coal from Murray Energy's Montana stripmines were around $10.30 per metric ton in early November, pricing this coal energy at $2.06 per barrel of oil equivalent.

STRANGE DAYS
By an almost supreme irony, European coal demand, more precisely European import demand for coal is growing, like its price - in major part due to Europe's clean energy/low carbon energy transition policy and its member state energy programmes. Also on 9 November, coal market watchers such as IHS McCloskey reported that thermal coal for 2013 delivered to Amsterdam, Rotterdam and Antwerp had reached a new high price of $95.50 a metric ton, reversing price losses earlier in 2012.

Another irony is that the world's No 1 and No 3 coal consumers - China and India - are like the No 2 USA becoming coal-averse, helped by the tendency for coal export prices, in some markets, continuing to hold up notably because of transport and infrastructure costs - but alternatives exist. In China and India, the continuing and massive tide of urbanization generates vast quantities of municipal waste. Power plants fueled by municipal waste, wood chips and straw are targeted for reducing consumption of coal to generate electricity. China, the world’s biggest coal user, offers increasing aids and incentives to build clean-energy plants, to help meet its now decelerating growth of power demand with lower environmental damage, local-produced fuels. Forecasts for urban growth in China show its cities may count 1 billion people by 2025, and India's cities may be home to more than 500 million people by 2025 - for a combined urban population of 5 times the total population of the USA today.

India, which like China obtains more than 65% of its electricity from coal, today, plans to add 29.8 GW (29 800 MW) of renewable-energy generation capacity by 2017, of which up to 2.7 GW could be based on municipal waste and bio-energy, according to government agencies. In both countries, as in the US, the coal-averse future threatens a price war among international coal exporters, with a major knock-on to international pipeline gas and LNG export suppliers. Russia's Gazprom, which supplies nearly one-third of Europe’s gas, agreed in November to revise down gas prices for German, Italian, Polish and other power producers - because it fears losing market share due to cheaper coal exported by the US, as well as the surge in global LNG supplies that will continue every year, to 2020 and beyond.

Coal's last laugh will however come, later. Both coal seam fracking, and controlled ignition of deep coal reserves leave underground the worst parts of coal -- the mercury, arsenic, and other toxic metals including lead. It also allows for highly simple capture of greenhouse gases, which can be piped back into the seam and stored there or sold to oil and gas producers who inject it into wells to enhance recovery rates. Development of in situ coal gasification is proceeding faster in places where natural gas is expensive and large untapped coal seams are deep, including Canada, South Africa, New Zealand, China, Pakistan and Uzbekistan. Neither of these preconditions particularly apply to US coal, at present, but the gas price range is sensitive.

COAL'S REVENGE
Hydraulic fracturing or fracking depressed US gas prices to a 15-year low of less than $2 a million BTU in April 2012, well below the $6 that would be needed to rationalize deep coal gasification, according to industry analysts and technology researchers at the USA's Lawrence Livermore National Laboratory in California. However, this price level of $6 is about 60% below current prices charged by Gazprom and by Qatar for their gas export supplies. The margin is therefore large: an increase in US gas prices, and a fall in world prices for traded gas will create a huge market opening for deep coal-based natural gas production and supply.

Potential quantities of this gas, from deep coal resources are "almost unlimited", probably at least equivalent to global stranded gas and shale gas resources found in the 7 years 2005-2011. These "new gas" resource finds are equal to about 150 years of present global annual gas consumption.

The definition of "deep coal" is highly flexible, with some regions of stripmining and shallow mine production, such as most US western States, defining this as coal located at 300 - 1000 metres below surface.  Other definitions set "deep coal" as seams and beds, sometimes huge (more than 100 sq kms) located at 2000 metres or deeper. The resource size can be appreciated from studies made by the Montana Bureau of Mines, only concerning the eastern Montana part of the large regional, Cretacious era coal zone covering 4 States, located at up to 1000 metres below surface: these estimates are of at least 125 billions tons of coal.  Studies concerning the deep coal resources of the European North Sea basin are of at least 350 billion tons. World current total coal conumption, ranking coal energy at almost equal to oil energy and well ahead of current natural gas energy supply, is about 6 bn tons per year.

Currently, the world's deep coal resources are impossible to develop, and present-day economic coal mining, notably due to competition from gas and renewables, and due to labour and environmental regulations, is increasingly stripmine and surface mining-oriented. Very few coal mines, today, operate at lower than 500 metres below surface. Deep coal is therefore a "new resource", able to be accessed for its energy content, without the pollutants, by fracking and by in situ gasification. The potential for this new energy development are of course dependent on global energy demand and price trends, which are dragged lower by global economic slowdown and very rapid and radical growth of shale gas, stranded gas and renewable energy supplies, forcing down producer and prime user prices for energy. By the 2020-2025 horizon, however, in situ deep coal energy producton is likely to grow, perhaps rapidly.

By Andrew McKillop

Contact: xtran9@gmail.com

Former chief policy analyst, Division A Policy, DG XVII Energy, European Commission. Andrew McKillop Biographic Highlights

Co-author 'The Doomsday Machine', Palgrave Macmillan USA, 2012

Andrew McKillop has more than 30 years experience in the energy, economic and finance domains. Trained at London UK’s University College, he has had specially long experience of energy policy, project administration and the development and financing of alternate energy. This included his role of in-house Expert on Policy and Programming at the DG XVII-Energy of the European Commission, Director of Information of the OAPEC technology transfer subsidiary, AREC and researcher for UN agencies including the ILO.

© 2012 Copyright Andrew McKillop - All Rights Reserved Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.


© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules