COAL prices have risen 70% from the beginning of the year and are now up over 150% since late 2006. SO WHAT if the people and funny politicians of the
United States, the "
Saudia Arabia of COAL"
(don't worry I'll post a World's Largest Coal Reserves REFerence post shortly), aren't about to endorse coal as a viable domestic alternative energy source right NOW amidst
$120 crude oil prices? U.S. public opinion is extraordinarily negative on coal because
WE still haven't come up with an efficient way to clean up its heavy fuel emissions...thus it remains
one of the world's dirtiest burning fossil fuels. In other words, coal is hated in the U.S and as an alternative energy source, it's Al Gore +
Global Warming's public enemy #1.
So I'll cede you the U.S. being done with coal for 4 years (
ok, maybe 8).
Thinking LONG TERM though...
WELCOME TO THE INTERNATIONAL SIDE OF THINGS. Guess who loves the dirty but
Oh-So-CHEAP energy that coal provides? Guess which countries can't get enough coal? Guess which countries don't give 2 licks about the U.S. and its opinion on global warming?
CHINA AND INDIA.
Ok, so maybe India and China will someday care about global warming but that's a ways off...there's actually something fundamentally legit about their current arguments + defense of their continued use of cheap, dirty burning coal. China and India both firmly hold the same principle belief..if the U.S. was able to go through its industrial revolution without environmental restrictions then they should be able to as well. Anything less would unfairly impede their countries'
God given rights to economic progress. They are also suspicious of the U.S. using global warming as a political tool to undermine their rapid pace of economic expansion.
Random Thought Of Brilliance...Considering they hold the WORLD's Largest Coal reserves, doesn't it only make COMPLETE $ense for the U.S. government to SUPPORT China and India's ravenous consumption of coal (despite maybe putting on a different face in front of the global warming-sensitive U.S. public) ??? YES IT DOES!
ANYWAYS...integral to my coal thesis is
My belief that China and India are going to ignore OUR global warming-sensitive opinions and IRONICALLY use GOBS of our AMERICAN coal to power through their own Industrial Revolutions. FYI and according to
CNBC, India is expected to import up to 65% more coal in 2008 vs. 2007.
So where is coal going in the short term? I have no idea. A 'global warming-sensitive' democrat in the White House probably can't be good for coal, right? Well at least not for DOMESTIC coal use. Admittedly, I '
ve probably followed coal the least of all major commodities because I've just been so turned off by its environmental concerns/headwinds
(and was also distracted by lots of other fast growing commodities including the usual suspects like crude oil, natural gas, steel, copper, etc.). Now though, with coal prices recently exploding upwards (
almost doubling over the past 12 months here in the U.S.), I'm starting to realize that coal, just like so many other commodities today, is an INTERNATIONAL growth story that can probably power on WITHOUT growth from the United States.
I've been blinded by my DOMESTIC red, white and blue eyes. Bottom line, I'm starting to believe more in the coal energy thesis.
With reserves so LARGE, it's only a matter of time before the 'Capitali$tic' U.S. and U.S. coal companies figure out a way to start making some serious coin off constantly rising INTERNATIONAL energy demands. It's the
AMERICAN way. There's
JUST too much money at stake..-------------------------------------------------------------------------
Lastly, just to share some numbers...check out the below comments from a
TRUE coal industry insider per a
CNBC interview conducted earlier today with
Peabody Energy (BTU) CEO, Gregory Boyce:
*Peabody Energy is the world's largest private sector coal company ($19 Billion
marketcap)
*Peabody Energy fuels 10% of the entire U.S.'s electricity generation...they supply 2% of the world's electricity generation
"The prices for some of our products in the international markets are up almost 300%...so while we've seen increased pricing in the U.S. and we think they will continue to increase, their (the prices) not even keeping up with what's happening on an international basis and THAT is what's driven the strong earnings outlook we were able to provide this morning on our conference call...The U.S. has the largest unused export capacity in the world. We expect net exports out of the U.S. to double over the 2006 to 2008 time frame and they have the capacity to grow even farther through time. So the net effect is that its the global marketplace that is driving the U.S. (coal companies) along with the steady, staid growth in U.S. demand that we've had for many years."------------------------------------------------------------------------
*Net of the net, per the
CEO's comments and my own ramblings above,
EXPORTS (and NOT domestic usage) is responsible for the current momentum/UPside behind U.S. coal prices + U.S. coal company sales/profits. This
export growth also seems like its still in its early stages...
Data Courtesy:
CNBC (
tv interview).
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