If I am correct, Chinese demand of coal and the integration of global coal markets may allow (and will cause) the organization of a coal cartel and a dramatic rise in coal's price. And coal mining and transporting stock (Remember: Buffet has acquired most of American coal transport infrastructure). The Oil Drum blog publishes an astonishing (for me) article on the subject:
Until recently, coal has been a resource used mostly in the country of origin. Internationally traded coal was a fairly small percentage of the total amount consumed globally—a situation quite different from that with oil, over half of which is exported from the country of origin. However, there is an increasing trend toward the development of an integrated global coal market—and it appears that trend is about to go into overdrive.I dont buy the article's conclusion, which is that economic growth has to be stopped. Not that anyone can stop 1.5 billion Chinese's desire to live in an apartment with central heating. Winter is cold in Northern China and most houses are not heated.
This means that if Chinese and Indian demand for coal imports pushes up the price for export coal (as it almost certainly will, and probably quite dramatically), the result will be higher coal prices everywhere—even within nations that are self-sufficient in the resource. After all, if a coal mining company in the U.S. can get twice the price for its product by selling it abroad as opposed to selling it domestically, won't it opt to export? Unless governments implement export curbs or domestic price caps, the international export price of coal will end up being the domestic price for countries everywhere.
7 comments:
We are in a lull now due to the worldwide recession but once the recession ends energy demand will go back up again, sending prices up (and the economy back down). Right now I feel that economic growth is being constrained (and the Arabs enriched) by the limited energy supply. We need more nuclear power, starting now. We should not be burning oil for electricity, ever - it should be reserved for uses as a transport fuel. If we had adequate nuclear facilities then even home heating could be electric - once you build enough reactors, the marginal cost of a kilowatt is almost nothing. Nuclear gives off no greenhouse gases either. Wind, solar, etc. just don't have the energy density necessary to produce sufficient power at reasonable cost. The original vision in the '50s is that we would build a large nuclear infrastructure and electricity would be "too cheap to meter" - you'd just get a flat rate bill each month. But the environazis got in the way and the Russians gave nuclear power a bad name with Chernobyl.
K
The big consumer of coal is China.
The big consumer of coal is China.
The US has a lot of coal but coal is difficult to extract and transport compared to oil, also more polluting.
Buffet controls all the railways from the mines to the Pacific ports. Rockefeller will be a pauper compared to him.
After googling Buffet's rail purchases I found out that Buffet had purchased one (BNSF) of the two major west coast railroads, while only owning 1% in the other major west coast RR (Union Pacific). Also, from what I found BNSF has more track in America's major grain producing regions that any other major railroad. So Warren's purchase of BNSF was a bet on the health of the Chinese economy in more ways than one.
Koko likes Xstrata at under 10.50 pounds.
Anon.
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