Skip to main content

Energy Market Analysis - Coal Reserves for Decade Ending 2012 and Price Forecast

According to the British Petroleum Statistical Review of World Energy, 2013, global coal reserves declined in the decade ending 2012:

Figure 1. Proved coal reserves.

Proved reserves of coal are generally taken to be those quantities that geological and engineering information indicates with reasonable certainly can be recovered in the future from known deposits under existing economic and operating conditions.

If we look at supply and demand factors in the decline, we can see that:

a) Coal price has grown significantly in the decade ending 20121:


  Figure 2. Prices in US Dollars per tonne.

b) Coal consumption has also grown significantly worldwide2:


Figure 3. Coal consumption by region.

c) The price of substitutes (i.e. Natural Gas) has also grown. Not so in North America though, but if we look at the world trend it is growing3:


Figure 4. Natural gas prices.

Therefore if the rule of supply and demand worked we would see increase in proved reserves for coal, because increase in demand with increase in price creates change in demand curve:

Figure 5. Demand and supply increase.

That would logically increase supply which we don’t see in case of coal reserves. We don’t include consumers’ income determinant here, because coal is not part of the residential energy market.

Therefore decline in reserves is possibly not due to supply & demand factors, but due to other primary factors, including:

  1. The exhaustion of the easier to develop coal reserves; 
  2. Carbon dioxide credits that increase costs of new generation resources using coal; 
  3. Political regulations related to environmental issues. 

As to the next 5 years “forecast”, the price of coal will grow which reflects the growing costs of production, transportation and processing. Growing demand for coal with the declining supply will also contribute to the price growth. Following table demonstrates this assumption4:



1 BP Statistical Review of World Energy, June 2013, p.30
2 BP Statistical Review of World Energy, June 2013, p.33
3 BP Statistical Review of World Energy, June 2013, p.27
4 EIA Annual Energy Outlook 2013

Comments

Popular posts from this blog

Energy Business Case - Coal Mine in West Virginia

Situation Coal in Africa: An opportunity is available to invest in a coal mine in West Virginia. The mine’s value is less than in past years because of actual and anticipated restrictions on coal-fired power generation in the United States. However, the mine has a chance to sell its coal on contract to a public utility in West Africa. The utility is working through the World Bank for financing to build a number of coal-fired power plants. If they obtain World Bank financing, then a customer for the coal mine is assured, at least for the duration of the contracts. The power plants will employ the best current technology for burning coal, which exceeds all current air quality standards for the region. However, the power plants will not be designed to attempt carbon capture. The area of Africa the plants will serve suffers from extreme energy poverty, with some of the lowest per capita energy consumption in the world.

Overview of the Region West Africa is the westernmost region …

Wine - Castello del Poggio Moscato Provincia di Pavia

Awesome wine. Sweet with notes of pear, caramel, apricot.


Some details

Mastering The Multitasking

There is usually two distinct perspectives on multi-tasking:

1. Multitasking is counterproductive. We get distracted by multiple tasks that all get our way and fight for our scarce attention, time and resources. This leads to a common fallacy that if you do multiple activities “at a time” you are not doing good work in any of those.

2. Multitasking is a way of getting many things done in a short period of time or in a long run.

Indeed it can be either a disaster or a great helper depending on how it is used and practiced.

Most recent research shows that we don’t do multiple tasks purely in parallel or simultaneously. That means we don’t purely multi-task, but switch between tasks and execute them one at a time, but by spending very small timeframes on each task.

A good example from the history is a story about Julius Caesar capabilities in that area. Plutarch writes, “Caesar disciplined himself so far as to be able to dictate letters from on horseback, and to give directions to two w…