“Coal: The fuel of the future, unfortunately” – The Economist, 19 April 2014

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The Economist

While natural gas has been waging a war on coal, coal will likely persist as a serious player in the energy market. Coal is inexpensive, plentiful, and easy to mine, ship, and burn. It is a cheap energy source for developing countries, and a great way for these countries to become rich.

Still, the issue remains that coal is not a clean energy source. Mining, transporting, storing and burning coal is a dirty job; underground mining can cause health issues for miners. Transporting coal has negative environmental impacts; opencast mining, a surface mining technique, destroys topsoil and devours water supplies. Coal is the biggest single source of pollution in the world, expending one-third of the world’s carbon dioxide emissions.

The US is experiencing a large shift away from coal and towards natural gas. Many big US coal companies, like American Electric Power and Duke Energy, are closing coal-fired plants. Yet, the Energy Information Administration (EIA) reports that coal will still be producing 22% of the US’s energy by 2040. Coal currently produces 26% of the US’s energy. China, the world’s biggest pollutant, is trying to restrict its coal consumption, but developing countries like Africa and India are picking up where China has left off. In Germany, coal is the cheapest it’s ever been. Japan, too, has recently authorized a new energy plan that has solidified coal’s role as the country’s main energy source.

Besides these boons for coal, international coal companies should still be worried for two reasons: one, that governments will place restrictions on coal; and two, the global oversupply of coal, which has pushed prices down and caused some coal companies to lose profits.

Still, coal remains a worthy adversary to oil and gas. Coal mining doesn’t necessitate expensive equipment, like drills, platforms and pipes, and when prices drop, companies can stop manufacturing and wait until prices pick back up.

Technological advances for producing clean coal—pulverizing coal, separating the gas from coal, scrubbing emissions and capturing carbon dioxide—look promising, though the methods are costly. A $5.2 billion clean-coal plant is being built in Mississippi, which was entirely funded by taxpayers. This will be the most expensive power plant ever completed, so we can probably safely assume that clean-coal plants won’t be the norm any time soon.

Developed and Written by Dr. Subodh Das and Tara Mahadevan

April 20, 2014

Phinix LLC

Copyright 2013. All rights Reserved by Phinix, LLC.

www.phinix.net    skdas@phinix.net

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“Aluminum Probe Focuses on Costs to Users” – Wall Street Journal, 13 August 2013

We previously reported on Goldman Sachs and JPMorgan Chase’s expensive aluminum storing and delivery practices, which, in August, were called into question by the Commodity Futures Trading Commission (CFTC), an independent agency of the federal government that regulates futures and option markets.

The CFTC believes that some Wall Street Banks have falsely inflated the prices of aluminum and other metals stored in their facilities, in order to make a buck (or well over a buck) from end users and consumers. The CFTC sent subpoenas to firms like JPMorgan and Goldman — as well as Goldman’s aluminum and metal storing facility Metro International Trade Services — requiring them to present recordings of their commodities operations from January 2010 and onward.

The firms developed a habit of shuffling their stores of aluminum, and holding on to them longer, in order to inflate prices; the additional time increased storage costs that are included in the aluminum price when delivered. The London Metal Exchange, which is in charge of creating pricing regulations, approved some of the firms’ warehouses that were subpoenaed.

Wall Street’s association with commodity and energy markets is being closely examined. Before the 1980′s, banking institutions weren’t allowed to own non-financial businesses — Congress wanted to reduce the risks banks take, as well as safeguard depositors. However, after the 1990′s, Congress and the Federal Reserve allowed some banks to develop businesses in storing and transporting commodities.

Both JPMorgan and Goldman have denied the allegations, maintaining that customers don’t face a wait time, and would receive shipments immediately. They also noted that delayed deliveries were due to client orders and not the firms themselves.

Time to move buying, selling and pricing back to inventory decisions, basing the metal market upon true market supply and demand from actual producers and consumers, rather than speculators and investment bankers.

Developed and Written by Dr. Subodh Das and Tara Mahadevan

September 25, 2013

Phinix LLC

Copyright 2013. All rights Reserved by Phinix, LLC.

www.phinix.net    skdas@phinix.net

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