The coming Global Energy Crunch !

Green policy stupidity.

To keep things less complex, and easier to understand I decide to do an energy post separated from the last Beyond Mathematical Odds. This post is a realization of all my previous analyses and forecasts with new variables to take into account.

Beyond Mathematical Odds - Food, Grains, and the coming container tsunami

Banning any type of Russian fuel (they are major exporters of oil, gas, and coal…l) would fatidical impact the global energy market and the EU decision to further pursue this incredible geopolitical move has dire consequences.

As forecast by most sensical experts, and a few people like me, Germany and Italy are now firing up their coal plants, going back on their green energy and clean goals.

“When you’re trying to balance decarbonization and energy security, everyone knows which one wins: Keeping the lights on,” said Steve Hulton, senior vice president for coal markets at market-research company Rystad Energy in Sydney. “That’s what keeps people in power, and stops people from rioting in the streets.”

In 2021 alone, the world generated more electricity from coal than any other source, increasing consumption by 9% compared to 2020, and this year it is expected to increase by another 11%, but this estimation was before current events, and this is going higher.

Suddenly, coal was back in vogue as a less-expensive alternative. Thermal coal, the type burned by power plants, is one of the cheapest fuel sources “on the planet,” with costs at about $15 per million British thermal units, according to a report dated April 1 from Bank of America. That compares with about $25 for crude oil and the global price of $35 for natural gas, the report said.

The European Union, which has some of the world’s most ambitious climate targets, saw its coal use jump 12% last year, the first increase since 2017 — albeit, that gain was from low 2020 levels. Coal consumption climbed 17% in the U.S., and also rose in Asia, Africa and Latin America. India and China, which dominate global markets, were also big drivers for increasing world demand.

The Europe Union saw its coal use jump 12% last year, the first increase since 2012.Photographer: Alex Kraus/Bloomberg

As I previously covered before, the gas prices and coal had massive impacts on the energy markets and cascaded to industry, which affected major steel producers, fertilizer, and aluminum, among many other industries, but these are the most important ones for the global economy and stability.

With the continuous need for coal, the world finds itself in a pickle, as I previously covered, Indonesia, the world’s leading thermal coal exporter, ceased exports in January to secure domestic supplies, and Australia can’t raise its supplies anymore and its top exporter warned Europe can’t rely solely on those supplies, and so Coal India, and here.

Indonesia, the top shipper of coal for power stations, halted exports of coal early this year to secure domestic supplies.Photographer: Dimas Ardian/Bloomberg

India is currently facing a historic heatwave. As you can see in the image below, using the terms India is burning will get you a dozen pieces on it.

India Asks Coal Plants to Run Flat Out to Ease Power Crisis

• Government invokes rare provisions amid widespread blackouts

• Decision impacts power producers using expensive imported coal

India is facing a crisis as power demand surges amid a blistering summer. Production of coal, the fossil fuel that accounts for more than 70% of electricity generation, has failed to keep pace, and the energy system is expected to come under further strain as demand tops a recent record in the coming weeks.

To the surprise of no one here. This has major impacts not only on the internal prices of India but the global coal prices and the further European (rich) countries push coal to “punish Putin”, the worse the energy security, therefore energy security gets, to the point where there will be hybrid retaliation, where India will use any sort of excuse to stop the export of any of its highly sought after exports (I am looking at you Active Pharmaceutical Ingredients).

Here are two examples of how countries that rely on coal will behave, to secure supplies. China cut its coal import tariffs to zero, so it can secure supplies at a lower price and is now moving to strengthen coal pricing regulations and giving more space for price fluctuations. It will also bully neighbors. Last year coal got so expensive in the chinese market, that the industry had to shut down, and I spent 3 months commenting and analyzing the cascade. It has systemic effects.

As the world moves to “cheap” energy sources to secure stability and to attempt to hold inflation, the cheap energy will get expensive, and poorer countries get the short end of the stick unless sensible heads prevail.

Russian Energy Ban Would Worsen U.K. Inflation, BOE’s Pill Says

• Bank of England chief economist rejects comparison with 1970s

• Risk of second-round inflation effects in labor market

A full European embargo on Russian energy supplies will drive inflation in the U.K. even higher than the 40 year record that it is on track to reach, the Bank of England’s chief economist said.

Source

As I mentioned, to this point, a dozen times, green energy means energy inefficiency at a systems level and a very costly future.

as the world moves away from fossil fuels and toward renewable energy. Eventually, she sees energy costs from solar, wind and other renewable sources falling below today’s prices for oil, gas and coal. But in the interim, people can expect traditional energy prices to rise as producers have less and less incentive to invest in fossil fuels. There’s also likely to be a spike in lithium, copper and nickel prices as green energy companies expand, Schnabel says. Finally, the massive investment needed from governments and the private sector to make the transition happen will probably lead to higher interest rates.

Since a few weeks ago I have inserted little bits of my opinions in these posts, this point from this piece is true, but yet, it averts to tell the real reason this is happening. There was the incentive to keep producing cheap fossil fuel energy, but impact funds and elite interests pushed the banking systems and global lenders into drying some of the available funds and leaving fewer investments to be made into newer technology, and proper development of capacity.

Political short-sightedness is the other reason we find ourselves in this situation, the inability to understand how complex systems and non-linear dynamics work, among the slow monster of bureaucracy. Unless met with strong pushback they will keep pursuing these insane goals, and implementing policies that will certainly end up in a disaster at some level.

This leads us to this tweet.

Amena Bakr @Amena__Bakr

U.S. SENATE PANEL PASSES "NOPEC" BILL THAT COULD OPEN OPEC OIL PRODUCERS TO U.S. LAWSUITS OVER PRICE COLLUSION #OOTT

U.S. Gasoline Futures Settle at Record High Ahead of Summer

• Fuel demand is expected to rise in the coming months

• Prices have risen as Russia’s war tightened global supplies

America is a rich country, and while this will most likely strain some of the impacts on the budget of millions, they still can “eat” the cost, and keep the economy functioning. While bad, it is not like diesel is hitting all-time highs.

"The prices are skyrocketing, and we still don’t get good prices for the loads," Michal Agboire, who works for Maitland Trucking, told WNCN. "If it goes any higher than this, and the price of the load not coming up, then maybe we just call it quits." 

"To cover the increased cost of diesel, truckers must increase the rates charged to haul freight. These increased rates are then passed on to consumers via higher costs at the retail level," Ron Faulkner, the president of Faulkner Trucking and 2022 president of the California Trucking Association, wrote in an op-ed at the Sacramento Bee this week. 

Diesel is the fuel of industry anywhere on the planet, and America is no different, the impact of high diesel prices isn’t solely higher groceries prices or more expensive electronics. 22% of the energy produced in the US is from coal, and that coal is moved using diesel by rail.

Record Fuel Exports From U.S. Gulf Coast Drain Tanks at Home

• Global markets low on Russian fuel rely on USGC refiners more

• Exports set to stay high on robust Latin American demand

Record fuel exports from the U.S. Gulf Coast are eating into domestic supplies, leaving gasoline and diesel tanks on the East Coast emptier than they have been in decades. 

Clear signs this isn’t going to get better any time soon, given the (insane in my opinion) decision of the Biden administration to export a lot of its fuel, and stick to the green goals.

U.S. Natural Gas Prices Could Soon Hit $10

Warmer than usual spring weather, expectations of a hotter summer, and record LNG exports to help Europe reduce dependence on Russian gas could send the U.S. benchmark natural gas prices to above $10 per million British thermal units (MMBtu) in the coming weeks, analysts say. 

Earlier this week, the front-month Henry Hub benchmark price hit a 13-year high of over $8/MMBtu, as prices rallied amid increased demand for air conditioning.

Coming the summer, I firmly believe portions of the Nothern hemisphere will experience some sort of energy rationing or full-on blackouts, and when reality comes knocking, countries will scramble to secure supplies of fossil fuel, and the markets will go haywire once again, and it will affect the industry at large. At the very minimum energy will keep getting more and more expensive, both for the consumer and for industry, therefore the inflationary pressure will stay on for a while, household energy prices in the US could go as high as adding more 40% to the current prices.

As I am writing this piece, this was just published.

Exports have become a big enough share of the market they have started to enforce a partial convergence with prices in Europe and Asia.

U.S. gas supplies have tightened as Europe and Asia scramble to buy LNG to refill their own depleted storage after last winter and amid fears about a disruption of gas supplies from Russia.

The rise in prices will enforce maximum fuel-switching among power generators from gas to coal to conserve fuel stocks this summer, with spot gas now uncompetitive against coal except for peak generation.

More importantly, high prices have started to encourage more gas-focused drilling, which should continue boosting output through the end of the year and into 2023.

I addressed the gas shipping issue in one of my opinion pieces. There isn’t the capacity to move all the cargo. Profits are so high, JP Morgan, one of the pushers for the clean, green BS is back at trading gas, too much money on the tablet to let it pass. That is your cue if you want to invest, the market will keep being crazy for at least 12-18 months.

Do a proper analysis of your region, see when and how blackouts happened, and try to prepare for blackouts or at least a big increase in energy. If you are a farmer the time to buy gas to dry beans was weeks ago when I wrote as much, the other time is now before it gets more expensive.

California WILL experience blackouts, isn’t even summer yet and their energy market is heavily strained, and the current megadrought isn’t doing the state any favors.

The Oroville Dam spillway at Lake Oroville during a drought in 2021.Photographer: David Paul Morris/Bloomberg

You can buy me a coffee whenever you feel like it.

Deep appreciation for all the supporters!