Coal, glorious(ly cheap) coal

Gregor highlights the pointless polarisation of many debates on clean coal. The coal lobby makes too much of emissions improvements dating back to 1970; opponents minimise the simplicity of reducing coal use. The problem, he writes, is that as oil holds steadily above $60, cheap coal becomes even more attractive:

But as I have written previously coal is a nemesis precisely because it’s a cheap source of BTU that continually prices just below other fossil fuels. And sometimes, it prices well below other fossil fuels. Such a pricing is forming now, as oil climbs back above 60.00, while Central Appalachian Coal (CAPP) still lingers in the mid 40’s per ton. The 5.8 million BTU in a barrel of oil will set you back 60 bucks. Yes it’s liquid. And yes, it’s a very useful form of energy. But the fact remains that the world’s poor, a full quarter of humanity, is still in the process of migration to liquid fuels. And coal, with its versatility in both heating and industry, is still the fossil fuel of choice for the developing world. For 45 bucks, you can get yourself as much as 25 million BTU in a ton of coal. That’s a 25% price discount to oil, for more than 4 times the BTU.

For these reasons,  favorable coal conditions are now moving in because oil is lifting in part from dollar weakness and reflationary policy at a time when industrialism remains weak. These are exactly the kind of difficult, almost fetid, economic conditions in which coal thrives. Coal likes a swampy, stagflationary landscape. One where growth has trouble getting off the floor, but where the world’s 6.7 billion people still need heating and basic power generation. Not exactly a happy story, is it?


Related links:

Coal conditions are coming (Gregor 21/05/09)
Clean coal confusion cleared up
(FT Energy Source, 03/03/09)
Gloves are off in clean coal battles (FT Energy Source, 27/02/09)

Energy Source is no longer updated but it remains open as an archive.

Insight into the financial, economic and policy aspects of energy and the environment.

Read our farewell note

About the blog

Archive

« Apr Jun »May 2009
M T W T F S S
 123
45678910
11121314151617
18192021222324
25262728293031