Thursday, September 16, 2010

Coal has not burned out yet

As much as there is growth in alternative resources, coal still remains the number #2 energy resource. According to experts, it still will remain a primary supplier of energy for at least the next two decades. What are the reasons for this?

1. Coal is cheap. It still is much cheaper than natural gas and oil. Clearly, it still remains cheaper than solar, wind, bio fuels when you add up the infrastructure cost to harness that energy.
2. It is easily transportable.
3. It is the supplier of energy for two of the largest growing economies, China and India. China accounts for 1/2 of the global demand for coal and India represent 7.5%.
4. U.S. has not put in place a carbon emissions tax or cap. At this point, it does not look like this will happen in the near future, especially if the Republicans gain some control of Congress. Also, too many states have some connection to coal economically, which reduction of coal usage will have an huge economic impact. In this economic environment with a high unemployment rate, it will be difficult for people to give up their jobs that will impact with the immediate future, their livelihoods, in order to protect the distant future, the planet's livelihood. I person is more concerned about putting food on the table now than what will happen is some hypothetical future created by scientists, who have recently had less credibility with the general public.

The US has stated that it is addicted to oil; however, there is a greater addiction for the global economy, coal. Like any addiction, it takes time to got off of that "drug." At least for now, coal will continue to burn that red glow to meet the energy needs of us.

Hey, at least, we will continue to get the latest upgraded ipod from China at a cheaper price because it was created using the cheap energy resource, coal. I just hope that ipod is waterproof when the sea rises twenty years from now. Then again, I guess we will have time to create one of those too.

Wednesday, September 1, 2010

A Hot Summer at home and in Russia

I took a hiatus from my blog postings to enjoy the summer. Of course, like many of us, I experienced the hottest summer in history on the east coast. Where I lived, we had 8 heat waves, meaning temperatures above 90 degrees Celsius for three consecutive days. It is September 1st and the temperature today will reach close to 100 degrees. What does it mean? Can all of the global warming pundits shout out in unison, "I told you so"? Of course, that might fall on deaf ears of the people who still deny global warming or that it is caused by man. Perhaps, as we see Russia dealing with forest fires and with 1/5th of Pakistan flooded by the heavy monsoons or Tennessee experiencing the most rainfall in one period of time in more than 1000 years, we can all work together and address this ever changing and unpredictable climate change. We will have to wait and see.

As I stated before, Russia faced the worse wild fires in its history this summer. Moscow throughout the summer was under a smokey haze. Also, Russia's wheat industry has been wiped out by these fires. As a result, spot prices for wheat rose by 24% in July and by more than 50% between the beginning of June and August 6th. In fact, the futures prices for September contract on the Chicago Board of Trades, which sales contracts of commodities, such as wheat, rose by more than 5%, which was the biggest daily increase since the end of the 2007-2008 food price spikes. Now, before you run to the supermarket and stock up on bread and flour, this movement in pricing is not unusual. The weekly wheat-price rises in July were no larger, compared with four weeks previously, than those during May and November 2009. In fact, if we look at prices over 12 week periods, they actually rose more at the end of 2009 than the past three months. According to Manuel Hernandez of the think tank, the International Food Policy Research Institute, this volatility is normal. The better indicator is not short term contract here, but long term ones, which have risen in price, but slowly. Another reason for calm is that we still have a significant global supply of wheat. In June 2008, the last "food-crisis", world wheat stocks fell to 121 m tonnes, the lowest level in 30 years. This was caused by the bio fuel frenzy and emerging markets growing demand for wheat. Today, we sit on 197m tones of wheat. This should be enough to absorb the impact of Russia's destroyed crop, which represent only 8% of the world's crop. Overall, the UN's Food and Agriculture Organization forecast that the wheat harvest will fall by about 5% this year. There will be a impact here, but not as cataclysmic as some feared. Also, this should benefit the US economy as one of the largest growers of wheat. Nevertheless, maybe it still is a good idea to get an extra bag of flour next time you are at the supermarket.