beegdawg007's Comments

Though Newer Sources of Power Are Being Built, Coal Remains a Cheap BTU

Thu, 30 Apr 2009 22:32:49 -0400

Coal's surprising new value proposition. Using coal can "reduce" CO2!!! Hadn't heard that one before myself, but here it is toward the end of this article..
money.cnn.com/2009/04/.../
""Sokol says, energy companies will need to produce more energy while emitting less carbon dioxide.

Electric cars will be one answer. They generate fewer greenhouse gas emissions than cars that burn gasoline, and they have lower fuel costs, even when oil is cheap. That's because electric engines are more efficient than internal-combustion engines, and because generating energy on a large scale (in coal or nuclear plants) is less wasteful than doing it on a small scale (by burning gasoline in an internal-combustion engine).

The numbers look something like this: Assume you drive 12,000 miles a year, gas costs $2 a gallon, and electricity is priced at 12¢ per kilowatt, about what most Americans pay. A gasoline-powered car that gets 20 miles to the gallon - say, a Chevy Impala or a BMW X3 - will have annual fuel costs of $1,200 and generate about 6.6 tons of carbon dioxide. Equip those cars with electric motors, and fuel costs drop to $400 a year and emissions are reduced to about 1.5 tons. """

I'm not sure if the actual numbers prove this to be true. However, even if overall CO2 in China does not decline from the development of electric cars, something of equal importance will happen. With a plug-in electric car, compared to an internal combustion engine, most of the pollution will be created out of the cities and much further into the country. For hundreds of millions of Chinese, air polution in the city is a real health issue. Also, an electric plug-in car that could go 60 miles without burning any petroleum would allow China to substitute energy from its vast reserves of coal for that of imported oil. The potential for plug-in electrics to move pollution out of the cities is a story worth watching.

What the US can do that China can not is use NG as a transportation fuel. China does not have vast enough NG supplies to do that. What America should be investigating in is plug in PLUS NG powered cars and light trucks. Couple that with NG powered commercial vehicles and America could lower greenhouse gas emissions while reducing the price of driving and reducing our dependence on foreign oil. Right now, 1M BTU s of NG cost less than $5. It takes seven gallons of gasoline to provide a million BTU s.

Is There Enough Natural Gas?

Wed, 29 Apr 2009 20:18:47 -0400

Fitz, there is little question that the US has enough NG to swap out a lot of vehicles to NG from gasoline. Remember however, in regards to CO2, which seems to be one of your concernes, NG is not a free ride. The CO2 in a million BTUs of NG is 35% less than petroleum and 45% less than coal, but it is not free of CO2.

As for EIA estimates of NG, I am certain that the estimate is way below the actual amount simply because we have had no reason to really look for more Ng. Also, Canada has a lot of NG and very few people.

Price wise, compared to gasoline, NG is a heck of a deal. Considiring that 1 m BTUs of energy from NG typically costs (delivered) $7 to $15, and that It takes 7 gallons of gasoline to produce 1M BTUS.

However, as for replacing coal in power plants, that would be enormously expensive. 1 m BTUs from coal cost less than $2.00, while that same energy from NG would cost $7 to $15. If the goal is to reduce overall CO2, the smartest thing to do IMHO would be to focus on replacing as much petroleum with NG as possible first because that would both reduce CO2 and move us toward energy independance. I personally do not think that man made CO2, now at only 1 part per 10,000 parts of atmosphere, is or can ever be a problem. But, if you are concerned primarily about CO2, I say convert transportation first and second, use NG in power plants to supplement coal burning. Many power plants already have the abiltity to switch between the two. If we strive for an electric infrastructure system which uses both fuels in every power plant, the competition between those fuels would serve to hold a lid on the price of both.

Also realize that niether China nor India have significant supplies of NG to rely on NG to provide electricity and heat. Niether of those countries are going to stop using coal. Since 90% of all ""future CO2 from coal"" over the next 20 years (EIA numbers) will come from developing countries, eliminating America's use of coal will accomplish little in the way of world wide CO2 reduction. Do some more research into CO2, and I think you'll find that the issue is but a red herring. Water vapor is the greenhouse gas which is responsible for 95% of the greenhouse effect. The steam being emitted from power plants will do more damage than will the CO2. Total atmosperic CO2 is now only 4 parts in 10,000 and three of those were put there by mother nature. www.petitionproject.org/

Though Newer Sources of Power Are Being Built, Coal Remains a Cheap BTU

Wed, 29 Apr 2009 16:06:01 -0400

Coal and your utility bill. The average American consumes about 950 KWH/month worth of electricity. The bill for the cost of energy being produced by coal powered electric plants is about 10-12 cents/KWh. What is surprising is that of this 10-12 cents, very little is actually as a result of the cost of the coal. A typical ton of coal contains 20M BTUs of energy which is equal to 5900 KWH. When this coal is burned to produce electricity the efficiency rate is about 40%. So, to produce 950 KwH of energy for the typical home requires 950KWH / (.40 x 5900) = .403/shrt tons of coal. According to the EIA, the average coal in the US now costs about $38/t. Eastern coal is much more expensive than Western coal but about half the coal burned in the US is very cheap PRB coal which now sells for about $12/t. Therefore, on average, a US home which uses electricity delivered from a coal powered electric plant spends only $15/month - 50 cents a day - 1.6 cents per KWH - for the coal that creates its electricity. All the rest of the bill is what the cost of the infrastructure (support and construction) and profit. That is why building windmills makes virtually no economic sense. A power system for a city must assume that it can deliver on peak power requirements on days when the wind is not blowing. Therefore, any windmill constructed is "incremental" infrastructure cost which does not result in any "incremental" income. And, as I just demonstrated, the cost of the infrastructure is typically about 85% of our utility bill. No wonder power companies have thus far resisted doing something as stupid as building wind turbines. It makes sense for T-Boone to build wind power because he is selling that wind to cities in Texas for a profit as a result of the CO2 hysteria. But, realize that these wind turbines provide incremental supply even though there is no incremental demand for power in Texas. T-Boone's wind turbines are simply adding incremental cost for a demand curve which has not expanded. I wonder if any of the Texas politicians have taken the time to explain that to the average Joe and Mary who must pay for this nonsense?

Though Newer Sources of Power Are Being Built, Coal Remains a Cheap BTU

Thu, 23 Apr 2009 13:17:49 -0400

o your insightful blog, I would add, these comments.

First, most do not realize that as of 2007, China and India combined already consume 50% more coal than Europe and North America combined. During the next decade, China and India will increase their coal consumption by an amount equal to all the coal currently consumed in North America. The future of coal is in the hands of Asia.

Next.. By law, thanks to the Greens, by 2020 Germany must close all 17 of its nuclear power plants. Germany is reluctant to switch to imported natural gas from Russia for obvious political reasons. Germany is turning to …. clean coal. In addition, the UK will shut down 2 nuclear reactors do to age. Only two new nuclear power plants are currently planned between now and 2020, one in France and one in Denmark. It is unlikely that Europe's dependence on coal - Europe burns almost as much coal as the USA – will diminish at all during the next 10 years. Google – Germany and “clean coal”.

Finally, Energy Sec Chu is very aware that coal must remain the backbone of the US energy policy. I listened to his testimony in the House of Representatives yesterday during the Energy Bill hearings. Steven Chu is very aware that China and India plan to continue to use more coal. He is supportive of clean coal technology development. Last night he stated that it would take at least 8 years for clean coal technology to become mainstream. Based on what I heard during the testimony yesterday, I believe that the liberal press has truly misrepresented Chu's view of coal. This guy has his eyes open.

Finally, based on what I heard during the testimony and grilling yesterday during the House review of Waxman's energy bill, Cap and Trade has zero chance of passing. I posted a detail post about that on the KOL message site earlier today. I doubt that this bill will ever even be brought to the floor for a vote. It simply lacks support from many key democrats.

Expert: Coal Reserve Estimates Way Too High

Fri, 06 Mar 2009 18:54:53 -0500

David Rutlidge.. knock!! - knock!! . - world coal problem solved... I just discovered an additional 1.7 trillion tonnes of coal. Hooray ... the world can now burn coal for 500 years or so. No foolin... The state of Alaska also believes that it has at least 200 Billion tonnes of recoverable reserves. The real question though, is why would anyone even waste money exploring for coal when we already know where the next hundred year supply is coming from.

www.steelguru.com/news...

Mr John Heugh MD of Central Petroleum said that “The findings are a solid outcome and whilst there has not yet been sufficient drilling to arrive at a JORC resource estimate, the report has defined a coal Exploration Target potential of between 0.6 trillion tonnes to 1.3 trillion tonnes above 1,000 meters with a total tonnage inclusive of deeper coal sections of between 1.5 trillion tonnes to 2.1 trillion tonnes in CTP's combination of Mining and Petroleum Act permits and applications that covers most of the same ground.”

steelguru.com/news/ind...

Inner Mongolian proved coal reserve reach 701.6 billion tonnes
According to the information released by the Department of Land and Resources of Inner Mongolia so far the amount of coal reserve in Inner Mongolia has reached 701.6 billion tonnes ranking first in the country.

Berkshire Hathaway Presents a Rare Opportunity

Fri, 06 Mar 2009 15:14:30 -0500

Not to be morbid, but what happens when WEB dies? Look at what happened to AIG after Hank Greenberg left! My concern with BRK is that it is all about Buffet! If he passes away, BRK sells off big time... All insurance companies - Berkshire is an insurance company - make money by investing the float until that day when a claim needs to be paid. If the float can not be invested in a way that returns more than it costs, there are no profits. Buffet has been brilliant about managing the float so that returns hold up during all markets. But who will replace him and how many years will pass before we know if that person is anywhere as good as WEB?

Time to Buy and Hold for Reflation: Four Promising Sectors

Fri, 06 Mar 2009 12:02:20 -0500

The impact of Co2 on global warming is an issue very relevant to the future of coal. China and India both understand that our view of Co2's potential impact on the environment is, at best, silly!

Many "real" scientists are now speaking out on this. Most are amazed that the junk science promoted by Al Gore has gone this far, when there is really ZERO evidence that our climate is behaving now, any differently than it has for the past 12,000 years.

www.petitionproject.or.../

People who understand nothing at all about CO2, are now radically opposed to burning fossil fuels which release CO2. Most non-analytical people (probably 4 out of 5 people) view CO2 as a toxic gas which, if left unchecked, will eventually kill all life on earth. Given that CO2 is necessary for life to exist, this is really some marketing job which has been done by the Gorite camp.

If you ever find yourself discussing the "horrors of global" emissions with a "radical believer" in the 'CO2 will kill the earth theory', here are two questions to ask.

1. How much Co2 is now in the atmosphere, compared to 150 years ago? Most will not know... the answer is 285 ppm vs. 385 ppm. To put that into a visual format, picture a 5 ft by 20 ft cylinder filled with 10,000 tennis balls, where each tennis ball represents some form of atmospheric gas, i.e. Nitrogen, Oxygen, Argon, Helium, Water Vapor etc.. , Going back 150 years ago, 3 of those balls would have represented Co2. Today, at 385 ppm, Co2 would be represented by 4 balls. So "at least" 3 out of 4 of those tennis balls were put in the atmosphere by mother nature. Many scientists also believe that a significant percentage of that 4th tennis ball is also natural. This they believe to be true because as the temperature of the ocean increases (the ocean contains 93% of all of the Co2 on earth) and as plant life flourishes (plants contain 2 times as much CO2 as the atmosphere), CO2 is released into the atmosphere. And the earth has definitely warmed during the past 150 years because we are exiting the latest phase of the little ice age. But, lets stay focused on the forest vs the leaves for now. All of this hysteria about fossil fuels and CO2 is in regard to the fact that man may have added the equivalent of 1 tennis ball out of 10,000 to the atmosphere in the past 150 years. This is extremely minimal, ant that is why CO2 is referred to as a trace gas in the atmosphere.
2. Next ask your opponent, "how much CO2 is good?" 99 out of 100 people will have no idea how to even answer that question! The answer is not a precise number, but we know that plants (both land and marine) become more abundant and grow larger and faster as the amount of CO2 is increased. Based on sampling the ratio of certain microscopic marine critters buried in layers of deep ocean sediment, scientists have been able to estimate that CO2 on the planet earth was 4 -5 times higher than now during the Triassic and Jurassic periods. This 100+ million year period of time is the period of time when life was "most abundant" on earth. During this period, based on fossil evident, we know that flora and fauna were most abundant.

To summarize my points, most people who are radically opposed to man's use of fossil fuels because of their fear of CO2 emissions, have no understanding at all of the role that CO2 plays on earth. Their fears of CO2 are but a boogie man that has been placed under their bed by politicians who clearly have an agenda that does not involve good science. There is ZERO real scientific data to lead any thinking scientist to believe that CO2 being added to our atmosphere at the current rate, will have any "negative" impact. We do however know that CO2 stimulates plant growth which has historically always been beneficial to earth's animals.

www.petitionproject.or...

31,000 American Scientists agree with what I have just posted...

www.petitionproject.or.../

Time to Buy and Hold for Reflation: Four Promising Sectors

Tue, 03 Mar 2009 23:48:57 -0500

I agree with coal and steel. Coal is so misunderstood by the average American investor. It is impossible to mention "coal" without someone responding with "obama's administration will kill coal" or something to that effect. People, the growth for coal is coming from China and India. Between the two countries there are 550 power plants under construction and they are going on line at the rate of 2 a week. Obama may be able to curtail the construction of future U.S. coal powered electric plants, but he can do little about those that are already operating because most cities have but one source of power. China already uses nearly 3 times as much coal as the U.S. and that will grow to 4 times in the next decade. China and India realize that this hysteria over CO2 will pass. If CO2 was the cause of global warming, why have the oceans been rising for 18,000 years. CO2 is good because it stimulates the growth of both plant and animal life on earth. Most non math type people do not realize that the CO2 in the atmosphere now at 385ppm, is to having 4 yellow tennis balls in a building which contains 10,000 tennis balls in total. And, 3 of those four tennis balls were put there by mother nature. And there is no evidence that yellow tennis balls have any more negative impact on the atmosphere than do white tennis balls. I am not the only nut who thinks like this. As for the ocean rising, it is. And, during the past 180 centuries (18,000 years) the ocean has risen 395 feet which, at over 2 ft a centure, is faster than it has been rising since the start of the industrial revolution. Go to the link at the end and you will see that 31,000 American scientists (9,000 PHDs) have signed a petition requesting that our government not sign Kioto or anything remotely resembling it because there is ZERO scientific evidence available which would lead any real objective scientist to conclude that CO2 is now or will in the future have an adverse effect on our economy. Pah.... leese do not take my word for this.. just go to....

www.petitionproject.or.../

This is important to understand because it explains why both China and India will continue to pursue those 550 coal powered electric plants over the next five years.

Life After Coal: Coming Sooner than You Think

Fri, 20 Feb 2009 07:21:36 -0500

Tom... a newsflash you might find of interest!

Dang.... it looks like someone just stumbled upon another 400 year's worth of new coal in Central Australia! Not kidding... this really just happened!

www.mineweb.com/minewe...

Massive Australian coal deposit has great CTL and gasification potential
A huge coal formation has been defined in central Australia which could contain 1 trillion tonnes of coal or more suitable for underground gasification or CTL development.

Author: John Chadwick
Posted: Thursday , 19 Feb 2009

LONDON -

A new report has identified an area of the Simpson Desert straddling the South Australian-Northern Territory border as sufficiently promising to be a serious contender in Australia's rapidly emerging underground coal gasification, coal bed methane and gas-to-liquids (GTL) industries. The report, the full text of which will be released shortly, found potential for well in excess of 1 trillion t of coal in the Purni Formation of the Pedirka Basin with estimates suggesting the coal seam potential is very well identified between 200 and 1,000 m depth. "cont'd"

Life After Coal: Coming Sooner than You Think

Thu, 19 Feb 2009 23:29:31 -0500

John,

The cost per ton is not of PRB coal is not really important. The issue is the cost per mm BTU. Right now PRB coal is selling for about $0.74 per mmBTUs, while eastern coal on average is selling for about $2.50 per mmBTUs. The moisture content is somewhat higher for PRB than it is for most appalachian coal but that's really not much of an issue when coal is used to generate power. PRB coal is an ultra low sulphur coal which is a real advantage. The key disadvantage is of PRB coal rail freight because PRB customers are located far from the mines in northeastern WY and Mnt. Right now it costs about $4.00/ton/100miles for coal rail freight. So a thousand mile rail trip adds $40 or more dollars to the cost of the coal. However, eastern coal also travels by rail so the disadvantage to PRB coal is not the entire $40.

PRB miners are steadily selling more coal further east. In 1994, Wy coal sales were 237 mm Tons. In 2008 WY coal sales are in excess of 450mm tons. Also the DOE projects that Western Coal sales, 90% of which are PRB, will continue to grow annually through the foreseeable future while Eastern Coal sales are in the process of topping out. The Eastern coal sales are topping out because of supply limitations in the east which are resulting from ever more difficult/expensive geological conditions combined with the inability to get new mining permits. The most encouraging segment of Eastern coal development is the Ill basin which contains over 100 B tons of recoverable coal that lies relatively close to some important customers. The value of Appalachian coal is really in the quality and the amount that can be used as either hard coking coal or PCI coal for making steel. Appalachian coal is also a good coal export product because of the proximity to shipping ports on the east coast and in the Gulf.

PRB coal exists in 100 to 150 ft thick coal seems which lie only slightly below the surface. These seems are mined using enormous drag lines which scoop the coal out two train car loads per scoop. According to the EIA, the average WY coal miner produces 38 tons of coal per hour, while a miner working in a typical underground App mine may produce only 3 to 6 tons per hour. That is why WY and MT mines produce the cheapest coal in the world. But PRB coal is not a crappy dirty lignite coal like that which remains in Europe. PRB coal is typically 8500 to 8800 BTU/lb coal which is ultra low in sulphur, which is important because it is the sulphur which unites with H2O to form sulphurus acid rain. PRB coal is fine for generating electricity, and that is why BTU, ACI, and FCL combined will sell nearly 300 mm Tons of PRB coal in 2009, and more in 2010 and more in 2011..etc...

Check this out...

www.eia.doe.gov/oiaf/a...

Regards,

b d;?D

On Feb 17 03:51 PM john s. gordon wrote:

> beegdawg - PRB coal is worth less per ton than higher-rank coal because
> it has higher moisture content and lower calorific value. costs more
> to ship to chicago because of that. there have been processes to
> upgrade the material before shipment but they have not gained traction.

Life After Coal: Coming Sooner than You Think

Thu, 19 Feb 2009 22:07:29 -0500

Tom, I came across an article that you really should read.

"Rethinking U.S. Coal Reserves and Resources". by James Mayer...

Very informative!

Read it and let me know if you still think that the U.S. will run out of usable/recoverable coal anytime in the foreseeable future.

74.125.95.132/search?q...

The author of this article explains how the US EIA (Energy Information Agency) estimates the various categories of reserves, i.e. recoverable, demonstrated, hypothetical, identified etc. To start off, he makes note of this most often referenced coal reserve statistic, which is that the US has recoverable coal reserves that are estimated to be 270 billion tons, which is 200 years worth of coal! Now even that is a lot of coal. However, the author than goes on to explain why the actual reserve tonnage is "at least" 2 times that, and probably more than four times that 270 billion ton EIA estimate.

This is a lengthy and detailed article, which I know most who visit here would not be interested in reading from beginning to end. So, allow me to just use one quote from this 13,000 word article to demonstrate why this authors view is probably on target;

The author states...
" Alaska provides a dramatic example of coal potential ****unrecognized**** by the EIA, (US Energy Information Agency). Total hypothetical coal resources in Alaska exceed 5.5 trillion short tons, [note that is TRILLION, not Billion] according to the most recent comprehensive "state" coal resource assessment.i By comparison, the EIA/USGS estimate of total U.S. resources, including hypothetical measures, is 3.9 trillion tons. Alaska accounts for a meager 6.1 billion tons in the 2004 DRB estimate, even though state experts state that coal reserves in Alaska very likely surpass all coal resources in the lower 48 states. This report asserts that the EIA’s 500 billion ton DRB (Demonstrated Reserve Base) estimate reasonably reflects the ultimately recoverable U.S. coal reserves. To put this in perspective, it is believed possible that 500 billion tons of coal may ultimately be recoverable from Alaska alone."""

Coal in a resource which the U.S. has mismanaged for the past 30 years. Had we learned how to liquif and/or gasify coal to run our cars, we would be not be importing oil from anyone. We would have saved $trillions$ on pointless wars, and tens of thousands of U.S. soldiers would still be alive. Tom, do you realize that 1 shrt ton of PRB coal, which sells now for just $13/ton, contains 17.6 Million BTUs of energy? Let me better highlight the potential of that. The 17.6 Million BTU's of energy contained in $13 worth of Wyoming PRB coal is equivalent to the total BTU energy equivalent contained in 140 gallons of gasoline!

Odds on a Two-Year Recession and a Three-Year Bear

Wed, 18 Feb 2009 13:20:56 -0500

If you can see when this will end, why could you not see when it would begin! I think you're just another guy with another opinion which amounts to nothing more than a huge WAG!

Life After Coal: Coming Sooner than You Think

Wed, 18 Feb 2009 01:19:20 -0500

Tom exports of US App coal increased to over 80 M tons last year. That was a 40% increase. Europe has no choice but to purchase coal since that which remains in Europe is ultra dirty lignite. Europe now gets most of its coal either from Africa, Columbia or America. As a source of exported coal, the Appalachian mines have an obvious advantage over western mines because or their proximity to rivers and shipping ports. The price of App coal did go up in 2008 because demand did outstrip supply partially as a result of the large surge in export coal to Europe. That was surge in demand, coincided with restricted supply expansion because of the difficulty in obtaining new mining permits as a result of recently heightened environmental activism in Appalachia. However, that does not really support the argument that the US is going to run out of coal. Their are very large new and accessable coal reserves in the Ill basin, Colorado, Utah, New Mexico, Wyoming, Montana and Arizona. Just go to the DOE web site and look up the data on known "minable" reserves. In addition, this data actually discounts reserves which exist in wilderness areas that are currently designated as off limits for mining. It is believed that Utah may contain a trillion tons of coal which is in federal parks. Also, as you must know, the US possesses the equivalent of a trillion barrels of oil which is locked up in US oil shale deposits in the Northwest corner of Colorado. That would certainly provide a backup plan should we actually run low on coal. According to the DOE database, the US has 270 Billion tons of "minable - recoverable" coal reserves. Since we are currently mining a little over 1.1 Billion tons per year, that will last the US at least 200 years. Those who know anything at all about coal would not take serious any argument which postulates the likelihood that the U.S. coal supply could run out in 25 years. All of the DOE and USGS data available indicates that US coal reserves are enormous. Because it would be best for humanity to simply leave most of that coal in the ground, I genuinely hope that we will ultimately find a viable clean alternative to coal. But there is no current technology on the horizon which looks as though it could displace coal to any serious degree within the next 20 years.

Regards,

bd

On Feb 17 01:53 AM Tom Konrad wrote:

> Your argument does not seem to account for the increasing prices
> of all grades of coal. If the rise of PRB coal were solely due to
> its economic and environmental advantages, would not the prices of
> Appalachian and Central coal be falling?

Intrinsic Value Investing: Recognizing Potentially Mispriced Stocks

Mon, 16 Feb 2009 21:00:25 -0500

WOW pardner... intrinsic value sounds conservative, but they way you come up with it requires a forecast for tomorrows cash flow.
Here is what the author says... "The forecast data then becomes available for years 2009 - 2013 using our default algorithms built around analyst EPS forecasts.""

Fifty percent of the time, analyst forecasts for the next year out are in error by 100% and more. I've been at this for 30 years. There is no mathematical short cut which gives anything close to a fool proof way to invest. The safest investments are those that have a huge economic mote and which are trading below tangible book value. And even that is risky if the value of the assets decline as they did with banking. The best formula for safety right now is 1. Minimal debt. 2. Priced below "tangible" book value. 3. Highly visible earnings such as sales that are currently under contract.

Life After Coal: Coming Sooner than You Think

Mon, 16 Feb 2009 20:47:22 -0500

"""Yes, even coal is subsidized from the Reagan Admin deciding to offer the Powder River Basin leases cheap back in the 80's. They could have gotten more for them. """

The reason that PRB coal is so cheap is do to the geological nature of the coal. The PRB coal lies near the surface and the coal seam is 100 ft thick. What's that mean? The average PRB miner produces 38 tons of coal per hour, while the average Appalachian miner worling in a productive mine, can only 6 tons of coal per hour. That's why it costs $50 to $75/ton to produce Appalachian coal while it costs less than $10/ton to produce PRB coal.

A Tradable Bottom in Oil?

Mon, 16 Feb 2009 18:52:02 -0500

That last chart did not work. Lets try this..

finance.yahoo.com/echa...;range=5y;indicator=em...

A Tradable Bottom in Oil?

Mon, 16 Feb 2009 18:49:37 -0500

Andy.... you are making this too hard. Oil will be at a tradeable bottom only when the 20 to 35 day MA start to move up. That's how I knew it had topped and that's how I'll know when it bottoms. This is a world wide commodity, not some penny stock. Don't try and "predict" what will happen. Simply watch to see what "is" happening. And, as anyone can see, oil has not yet bottomed...

stockcharts.com/h-sc/u...

Life After Coal: Coming Sooner than You Think

Mon, 16 Feb 2009 18:25:33 -0500

The Danes have a good wind power grid because they have wind.. and because they do not have either coal or nat gas. What real choice do they have. Also, there are only 6 million people in Denmark.

On Feb 16 05:22 PM Igorsky wrote:

> Jimbo
>
> The reason the Danes have a good working windpower grid is beause
> it is hooked up to the German grid. When the wind fails the Germans
> provide the power. The Germans rely mostly on coal plants although
> they now have a good solar power system (heavily incentivized) hooked
> up to the electric grid.

Life After Coal: Coming Sooner than You Think

Mon, 16 Feb 2009 18:22:20 -0500

Tom's entire argument is flawed. Tom's argument is based on this observation.. "The Powder River Basin matters because Western coal has been the only source of new coal production in the U.S. for the last two decades. Appalachian and Interior coal production has been declining, despite mostly increasing prices, and uniformly increasing prices since 2003."

Well of course PRB coal has been increasing and while App coal has been decreasing. Its not because the coal is not there to be had, but the economics favor PRB coal. PRB coal has been selling for $10/ton at the mine vs. App coal which has been selling for between $60 and $120/t at the mine. Add $30/ton to PRB coal for additional rail freight and its still much cheaper per BTU than App coal. Also PRB coal is ultra low sulphor coal which means that power plants that switched to PRB coal did not have to invest a ton of money in new scrubers to meet new emission laws. In addition, new permits for new App mines have not been at all available for three years because of environmental activists. That however does not mean that there is a shortage of coal. The US has coal out the kazoo in Montana, Wyom, Utah, Colorado, Ill Basin, Arizona, New Mexico, Alaska...

One more "obvious" issue is this. The production of US coal can not increase until the demand increases. Funny thing, but every year, production and demand must exactly balance out. There has simply not been much of an increase in the demand for coal because more power plants are now being constructed to burn Nat Gas and because wind is being used more to bring in at-margin power. But the fact that demand is falling slightly really means that the 200 year supply we have will last longer if we choose to use it.

Today's Commodity Prices Forecast Tomorrow's Inflation

Wed, 28 Jan 2009 23:39:08 -0500

I think you are right, but very early in your forecast. When this finally occures, I believe the way to play it is Steel and Coal. When things again start to rip, Steel will move first because most of the stumulus plans in the world, particularly in China, are focused on infrastructure building. That means rebar, beams, rail, siding, ships, storage tanks, new cities, power plants..etc.. All will require mega tons of steel. Every ton of steel requires .6 tons of coal in the form of Coke. Cement for concrete is made by heating limestone to 1500 degrees for a long period of time. That is most often done with coal as the heat source. As for electricity, between India and China, there are now 500 new coal powered electric plants in process. This is why I prefer steel and coal over oil or gold.

As for your comment... ""For instance, the downtrend in gasoline futures has been broken and the cheapest gas prices are now behind us. This is largely due to the stabilization of oil prices of late. Oil appears to have found a floor around the $30 to $40 a barrel range.""

The cheapest gas prices may be behind us, but the reason is primarily do to the fact that refiners have finally reduced production. They are now running at about 85% efficiency. There is finally a reasonable crack spread between oil and gas. That is what is now pushing gasoline prices up, and that is why the refiners have recently rallied.

I do not believe that there is a world wide shortage of oil. There were never any supply problems. Oil was up because it bacame a specultive play. Just look at the enormous increase in the number of future constracts written in the last two year vs. earlier years. The volume tripled. In additon, in the next few years, a lot more oil will come to market via the Ukraine, Iraq, Brazil and, believe it or not, North Dakota in the short run. In addition, all the major refiners can now process considerable quantities of Heavy and Sour crude. This opens up an entirel new supply avenue. Bio fuels are now being made everywhere from anything which contains sugar, starch or oil. In California, biofuel is being made from used fry oil and animal fats. In Indonesia, cola nuts are a source of bio fuel. And syn fuel projects (coal to diesel) are springing up everywhere. And, we certainly should not ignore the fact the world is placing a huge amount of emphasis on improving automobile effeciencies. There are now many gasoline powered cars which get over 30 mpg. The new plugin electric cars whic will soon be offered by nearly every major automobile company, will go the first 40 miles on electric power (coming mostly from coal powered electric plants). Since the average driver, on average drives less than 40 miles/day, over their lifetime, these cars will actually use 70 to 80% less gasoline. T Boon Pickens, Mr. Oil himself, thinks the US should swich commercial vehicles with large fleets such as UPS trucks, US Postal trucks, Telephone and Cable companies etc. to Natural Gas. That makes economic sense for the companies to do this when you consider that 1 therm of NG which currently sells for about $4.50 provides the same amount of energy as 7 gallons of gasoline. All that really needs to happen is for these trucks to become available out of the factory with motors that are setup so that they will run on NG. This is a minor cost at the factory but it is a $2000 conversion if put on later.

I think investing in oil is a risky bet right now because the world finally realizes that oil is the source of most of the political friction in the world.

Another View of Industry Momentum

Wed, 28 Jan 2009 22:55:28 -0500

Interesting observation. An observation....

Yesterday, I read the transcript of the US steel year-end announcement. One thing jumped out. For the past quarter US steel and all steel suppliers have been working down inventory. According to AISI US steel inventories are now at their lowest level in thirty years. That is what extreme fear does. My suspicion is that this is true for many industries throughout the world. Steel inventories are being worked off, auto inventories are being sold off, lumber inventories are being depleted, etc... So, what happens when some of this stimulus around the world finally kicks in. I think maybe... BAMM!!!! ... all at once, everywhere, production must be again cranked up because there is no inventory available. We certainly are not at the recovery stage yet, but we are near a bottom. The steel industry for example, actually saw some improvement in as new orders again started to book. Thermal coal prices have apparently bottomed throughout the world and steel prices are actually quite a bit off of the lows of Nov and Dec.

Across the world, over $2 trillion worth of development programs are now in the launch phase and interest rates are at 50 year lows. Combine that with ultra low inventories and... well.. we could really see a BAMM!!!

Peabody Delivers on Quarter, But Guidance Not Ready for Prime Time

Wed, 28 Jan 2009 22:33:48 -0500

Good article. I agree with almost everything, but several relevant issues were not included.

1. Yes, Peabody did speculate that the world might need as much as 40 mt less of met coal. They went on to say that 35 million tons (including Russia) have already been removed from the market from miners who represent only 50% of the overall market. The point being made was that supply and demand will still be very much in balance. That of course would serve to put a floor under the price of met coal.
2. In regards to earnings, using the following assumptions, Aust coal at $100 (3.25 tons are now priced at $300/T), Western coal at $15/t and Mid west coal at $45/t, my model for EPS indicates that BTU will earn at least $3.25/sh next year. Change those assumptions to Aust. coal at $110/t, Western coal at $16 and Ill basin coal at $50 (all are real possibilities for 2009) and the EPS for 2009 is about $4.75.

I think that BTU is a pretty cheap stock considering that it is the coal segment leader. For 2009, what I think will continue to move BTU is the fact that it will be constantly buying up weaker coal companies. The POLO which gives BTU access to high quality coal located only 500 miles from China's major industrial center, is really very significant in the long run. Also, BTU is working to build a supply chain to sell PRB coal to China and Japan via the Vancouver coal terminal. They have already started shipping some of this coal in 2008. BTU's future is pretty much assured because the company owns the largest supply of the cheapest coal in the world which is PRB coal in Wyo and Montana. BTU is to coal what ARAMCO is to oil. At only $15/ton the gross profit on that coal is 50%.

I do not own any BTU. I invest in coal primarily via KOL because currently every major coal company in the world is dramatically undervalued, so they will all move in tandem. BTU has a good story, but it is a story which is no better than that of ARLP, ANR, MEE, WLT, Shenhua, China Coal, Bumi, etc... One coal company, Grande Cache, has no debt and is now trading at a forward PE ratio of .... 1/2!!!

These stocks are all trading on the fantasy fear that coal prices will plunge in 2009. I say fantasy fear because the fear ignores the facts that 1.The supply/demand of coal is really well balanced because nearly 70 million tons of supply has already been removed from the 2009 market. 2. Most of 2009 coal sales are already under contract at the highest prices ever seen.

Huge Incentives for Energy Storage in Today's House Bill

Wed, 28 Jan 2009 21:50:51 -0500

Bill,

Thanks for the articles and the updates. I really appreciate your informative posts. In regards to lithium Ion batteries vs lead acid, a thought came to me as I read your privious article. In that article you claim that Li batteries can be recharged up to 10,000 cycles. You feel that this is far more cycles than anyone will ever realistically need. You also state that their is a very real environmental hazzard inherent to Li batteries because they can not yet be recycled. I am not disagreeing with either of those positions. However, the following thoughts in regards to their use in automobiles came to me. 1. Lead Acid batteries are probably good for, at best, 5 years of daily use. And, they are considerably heavier than Li bts. If a car has a useful life of 18 years, it would require three sets of Lead Acid bats, but only one set of Li bats. In addition, after 15 years, if the car is useless, but the batteries are still good, one could either sell the useful batteries or buy a new car with out batteries and install the used batteries for energy. 2. Li batteries weigh much less per kwh, than do lead acid batteries. So, if the LI batteries have, as you suggest, a life of 30 to 90 years, from an environmental perspective, the amount of energy which is conserved as the result of not hauling around an extra 200lb to 300Lbs every day would really be quite enormous. And, yes, that is "non polluting" electricity but in reality on a world wide basis, according to the DOE, most of that electricity will still be comming from coal powered utility plants in 2030. Overall, it seems to me that both the energy saving and economics over the lifetime of the batteries is really greatly in favor of LI batteries. Also, if your estimate that these batteries should by useful for a minimum of 30 years, vs lead acid batteries which might last for five years, I wonder if the lead acid batteries are really more environmentally friendly when 6 sets of lead acid batteries will have to be made for every one set of li batteries. Just consdider the amount of coal which must be burned to make six sets vs one. I honestly suspect that the li batteries would be easier on the environment than would the six sets of lead acid.

Just my thoughts. Thanks for alerting me to this opportunity. I own a small position in CBAK.

Renewable Energy Reality: We're Dependent on Coal

Sun, 18 Jan 2009 15:51:42 -0500

>>>>The recent pair of TVA catastrophes are likely to stop any new coal plants in the USA.<<<

There are now 29 new coal power plants under construction in the US. By the end of 2010, 60% of those will be operational.

The Real Rationale Behind Current Supply and Demand for Oil and Other Commodities

Thu, 08 Jan 2009 03:14:03 -0500

>>>The US coal market is now a bear market. Coal is long term bullish but short term bearish.<<<

Careful... within the next three weeks, most of the coal companies will be announcing the settlements for 2009-10 thermal coal pricing. Almost all of the 2009 coal is already priced at prices which are 50 to 100% above the 2008 prices. JRCC for example, has most of its 2009 app thermal coal priced at $96/t vs last years price of $55/t. Despite the negative news you are hearing, the 2009 earnings year for all of the pure US thermal coal producers will be a banner/blowout year. JRCC for example will earn about $7.00 share and BTU will earn over $5.00/share. It is also worth noting that the balance sheets are in the best shape they have been in for the past ten years and most are now buying back their own shares. Also, insiders have been buying a lot of stock this past quarter.

Because their 2009 coal is all sold under contract, none of the US coal producers have any real exposure to the decline in the world economies until the second half of 2009 and than, and even than it is only the coking coal sales which will require new contracts. For the biggies like ACI, BTU and ARLP... all 2009 coal is already priced at very favorable prices! Also, China's largest supplier last week, signed three power plants to new contracts for low quality (10,000BTU/lb) thermal coal at $80US/tonne. Also, current US spot prices are still way above the cost of producing coal which is roughly $55/ton for App coal and $32/ton for Ilb, $10/t for PRC... at the current spot prices these companies would make money butt over boot day in and day out!

www.eia.doe.gov/cneaf/...

The Technicals Say It's Time for Oil

Fri, 26 Dec 2008 12:10:07 -0500

I think you are anticipating your indicators. Everything I see in the charts for USO says it is still in a short term down trend. RSI is below 50, and USO is still below the 10,20 and 35 day Exp. MAs.. and Money Flow is still negative, and Par SAR is still saying Sell. Eventually USO will go up, but the TAs are not yet signaling that to be true..

finance.yahoo.com/echa...;range=6m;indicator=em...

SEC's Cox says his biggest mistake was agreeing to a short-sale ban on financials. Other than that, Cox praises the SEC for "not being impulsive, not changing the rules willy-nilly." That caution "has really been a signal achievement for the SEC." Was that signal? Or single?

Wed, 24 Dec 2008 13:17:01 -0500

COX will go to work for either a hedge fund or a lawfirm that supports a short selling hedge fund after leaving the SEC. That's his "payday" for buttering their bread for the past 18 months. Just take a look at the VIX immediately following the SEC's illimination of the uptick rule on July 7, 2007. I think the SEC is so corrupt that it should be illiminated altogether.

Could Coal Recover?

Wed, 24 Dec 2008 13:09:37 -0500

Regarding supply vs. demand... this time its different!
Really....

What has changed..

For the following reasons, coking coal miners can now cut back on supply in 2009 to map it closely to demand.

1. Most are comming up on what what will be the three best quarters they have ever had. Q408, Q109 and Q210. Q210 will be strong because spillover tonnage that was sold at $300/tonne for delivery through March 2009 will be delivered in Q2 of 2010. Because steel mills are postponing deliveries, there is a significant quantity of $300/tonne coking coal that will be delivered in the spring of 2009.

2. The Brazilian coal year runs July 1 to June 30. Companies like WLT have sold large quantitites to Brazil.

3. The balance sheets are exceptionally strong, so miners do not need to sell coking coal at marginal profits just to make interest payments.

4. Labor is stil tight, and most miners have had their employees working overtime just to meet demand. They can simply stop hiriing, move crews to the most productive portions of the mine, and discontinue any overtime if they need to.

5. Most coking coal miners believe that there is a serious shortage of coking coal in the long run. I doubt they will sell much coking coal at $90/tonne in 2009 if they believe that same coal will fetch $200/tonne in 2010.

6. Several miners have already put the brakes on expansion plans and idled poorly producing portions of their operations. Many of the smaller mining operations can not produce coking coal FOB port for less than $90/tonne. Very few of these companies are going to risk going broke by selling coking coal for less than it cost to produce.

7. The one very vulnerable and large producer of coking coal, TCK, has already indicated a willingness to sell as much as 20% of Elk Valley to strengthen its balance sheet. Companies like BTU, and ACI have indicated an interest in expanding, and major steel companies like Posko and Nippon steel have also shown interest in locking in a long term supplyl of met coal.

I think that this time, we will see very protracted negotiations and prices that will likely surprise on the high side simply because the miners are willing to curtail supply to meet demand. Alwso, many of the met coal miners are also thermal coal miners. Those companies have 2009 thermal coal sales mostly locked by now at very favorable prices and many have high percentage of 2010 thermal coal sales locked. WLT, for example sold all of its thermal coal for three years at $100/ton. And BTU and Massey have most of their 2009 thermal coal now under contract with as much as 80% of 2010 thermal coal under contract.

The met coal miners are actually in a very strong position now vs. anytime during the previous 10 years or so...

Junior Gold Miners Are Dirt Cheap

Tue, 11 Nov 2008 17:22:49 -0500

Good post. Thanks for the info and research. One comment in regards to your statement that many of the junior gold miners are trading below book. That is true, but it is true because the asset valuation is based on the price of gold when the companies acquired the right to mine a given area. If the price of gold were to drop a lot.. which could happen in a deflationery environment... the assets for many of these companies would actually fetch a far lower price than is their current book value. That of course is relavent because the theory behind buying a stock based on a BV of less than 1 is that, even if the company is liquidated, the stock would make money.

Dryships: The Saga Continues

Fri, 10 Oct 2008 12:18:02 -0400

"DRYS has rigs and bulk vessels, plus perhaps some additional value from its organization and customer relationships."

You glossed over a very important asset. The two drill rigs owned by DRYS are chartered via long term charters (one charter is 3-5 years) at an average day rate of $600K/day. In addition, about half of DRYS vessels are now booked to long term charters some as long as 10 years. And finally, DRYS has a lock on 4 new build Ultra Deep Water - Nasty Weather Drill Rigs. The waiting que for these is 4 years. Two of the Drys drill rigs are set to be delivered in 2010. There are now only 89 of those in existance. Those assets could be easily turned today for a $200M profit given that the day rate less operating cost is $500K/day. I have worked through several valuation exercises based only on an estimated real liquidation valule. Using various figures for the ships, rigs, contracts and new build holds, I conclude that the minimum liquidation value is $60/share. It is interesting to note that at this moment, newer used ships available for immediate delivery are selling for more than the contract price of a new build similar vessel to be delivered 2 years down the road. With the exception of 2 vessels, all of DRYS vessel are newer vessels.