Thursday, July 9, 2009

"Cap and Trade" Coal for Gas


Coal is such hoary, obsolete fossil fuel that it should stick to its primordial glory days of Britain's industrial revolution. Regardless, it remains abundant and readily available, supplying America with 50% of her power, and China with roughly 70% of her power. Of course coal abundance has its skeptics (only 100 years of coal left(!?) - build the doom bunker!!). Nevermind Britain's coal production peaked in 1913; minus her once sprawled empire and its dirty "workshop of the world," Britain's average bloke living standards would leave 19th century highbrows slack-jawed.

A Seeking Alpha post looks at the "cap and trade" proposal, indicating it would push for less coal, and greater reliance on natural gas:

In any case, I jumped into commodities earlier this week (a few days too early), and am happy to hold UNG, FCG, WMB, WPZ, GSG, COP, and DBC. If approved, President Obama's cap and trade program will reduce coal and require more
natural gas and solar power. Thanks to environmentalists, America may finally be
able to reduce its dependence on foreign oil.

As I've already pointed out, the "cap and trade" program is not perfect--the government may end up artificially increasing certain commodity prices by transferring subsidies from coal to other energy sources. Even so, I'd
rather subsidize clean energy than environmentally harmful energy sources.

Owners of Market Vectors Coal ETF (KOL) might want to assess the impact of the cap and trade program very carefully. Although it provides some exposure to Chinese coal companies, all coal companies will remain an uncertain bet as cleaner energy becomes more viable. After all, why would power plants use coal when they can use natural gas? From the EIA:

In the electric power sector, natural gas is an attractive choice for new generating plants because of its relative fuel efficiency and low carbon dioxide intensity. Electricity generation [will account] for 35 percent of the world’s total natural gas consumption in 2030, up from 32 percent in 2006.

You might still be wondering, "Why natural gas? Why not nuclear, wind, or solar companies?" Elementary, my dear Watson--it's the simple process of elimination.

First, America has far more natural gas than petroleum. Many Americans already know we have more natural gas than oil, but I am very surprised to see so many people overestimating cap and trade's foreign policy implications. If you think switching to natural gas will crush foreign regimes, don't kid yourself--the Middle East still has the world's largest supply of natural gas. I am willing to bet that in ten years, Russia and Iran spearhead a new natural gas "OPEC." That's okay--America won't ever be as reliant on natural gas imports as it has been on petroleum imports. In fact, Canada will probably be the largest foreign beneficiary of increased natural gas use.

And with 100 years of natural gas, why not? Oh wait... only 100 years of gas, like the possible 100 years of coal!? Oh shit, we're fucked! Just like in 1913, when a dark cloud loomed over Britain's late 20th century fate...

- Brewskie

2 comments:

  1. Personally, I am intrigued with the mini-nukes being touted by some VC outfits. B Cole

    ReplyDelete
  2. Smaller, cheaper, workable - the technology is present, and they can help foot the gap for eons, or until solar technologically steps up. Nobody should have to recharge their car at McDonald's

    ReplyDelete