The EIA weekly coal report showed a stable price from most basins. The change occurred in the most expensive coal, Northern Appalachian, which fell 2% to $146 per short ton, and Illinois Basin coal, which rose 33.8% to $95. Prices are double to triple the level they were just last year, pressuring utilities to raise electricity prices in the months ahead to recover the higher costs.
In oil, crude oil imports by China in July were actually lower than their year ago level. There are different rationales put forward like a calm before the Olympics and a buildup in inventory through June that lead many analysts to believe that today’s numbers are a temporary blip. But since China is the main source of new global demand, such a drop after they increased the price of gas and diesel is another bearish signal along with the strengthening dollar that has kept oil from climbing on the news of conflict between Georgia and Russia. Chinese imports of petroleum products like diesel and gasoline were still up ~20% from last year, but they are smaller quantities than the crude oil shipments.
The fact that oil has fallen 22% from its July record of $147 per barrel may lead many to call the oil bull run over. But the run-up in prices since early 2002 has included many similar slides before the bulls resumed their stampede. They include a 31% drop in early 2003, a 28% drop in late 2004, 19% drop in late 2005, and a 25% drop in late 2006. The annual trend has been a 30% price increase per year, which would occur even if the price fell further to $93 per barrel. If this ~30% per year trend continued into the future, we would pass $250 oil in 2012 — later than Gazprom’s CEO predicts but very soon for all transportation and oil-related planners. While our economies are luckily getting a break in energy costs these past several weeks, we are still at a much higher level than the past and serious upside price risks exist from weather, political conflict, and other events.
Tags: China, oil prices, US coal