A number of stories today report fuel and electricity shortages changing business as usual around the world. Some of the biggest difficulties exist in Asia, where demand is growing fastest. China is facing some of its biggest coal supply difficulties since 2004 as national electricity rates are capped, preventing utilities from getting the revenue to buy more expensive supplies. Their main utility company reported that 46% of their stations have coal supplies below the “caution line” and 3% of capacity has had to shut due to a lack of fuel. They have responded by rationing that has reduced production in some energy intensive industries such as aluminum. And India is also facing coal shortages, causing their second largest aluminum producer to mull shutting down within a few days. In a similar situation, the Indonesian government is asking many of their industries to shift their days off from Saturday and Sunday to weekdays. This tactic aims to lower the peak demand for electricity by spreading the demand load more evenly throughout the week. Pakistan and Iran are both increasing rates and reporting large blackouts due to their electricity and fuel shortages. It looks like price pressure in the Asian coal market will remain bullish for some time. If current tight energy conditions continue globally, we may see similar actions all over.
The EIA weekly oil report halted the bearish sentiment today by showing a significant drop in gasoline inventories (though they are still above average) and crude oil and propane inventories remaining very low for this time of year. Now heads turn to the natural gas report tomorrow morning to see if that fossil fuel can continue a downward trajectory as the dollar gains some strength of late.
Tags: Coal, Electricity, Oil