Favorable Coal Conditions Now Moving In

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"Coal is a nemesis precisely because it's a cheap source of BTU that continually prices below other fossil fuels. . ."

Recently I had occasion to watch an online debate between a clean-coal advocate and a robust, articulate green-energy blogger. The debate followed predictable contours. The clean-coal advocate repeated a series of inflated achievements. The green-energy blogger deflated these claims, but then painted pictures of a peaceful and clean world. A world portrayed as easily attainable. I patiently read through to the final jousts, then sat back to watch oil climb above $60.00.

The dialectic of the environmental debate, over coal, has now formed a well-worn path. It's largely political and the core thrust of the conversation, just as in oil, is that everything could be solved if only the opposition would get out of the way.

The bigger problem with this debate, especially as it occurs in the U.S., is that it constantly pivots off the notion that we have lots of freedom to decide how both we—and the rest of the world—will use coal. Coal is a nemesis precisely because it's a cheap source of BTU that continually prices below other fossil fuels—sometimes well below. Such a pricing is forming now, as oil climbs back above $60.00.

The 5.8 million BTU in a barrel of oil will set you back 60 bucks. Yes it's liquid and a very useful form of energy. But the world's poor, 1/4 of humanity, is still migrating to liquid fuels. Coal is still the fossil fuel of choice for the developing world. For $45, 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. That is some serious BTU bang for your buck.

Oil above $60 today is more than enough of an energy price-shift to kick global coal demand into a much higher gear. The data clearly shows the total global call on coal this decade was enormous. 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 the conditions in which coal thrives. Coal likes a swampy, stagflationary landscape—where growth has trouble getting off the floor but the world's 6.7 billion people still need heating and basic power generation.

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