(Source: Weekly highlight from Platts Energy Week for February 6, 2011.)
Coal is already a global market, but the opportunities for high profits through exports are on the rise. The recent torrential rainfall and tragic flooding in Queensland, Australia caused a significant amount of damage to both the mining and transportation infrastructure. Though the damage is repairable, it will interrupt or slow shipment volumes from one of the world’s largest coal exporters. That loss of supply at a time when the world’s economy continues to demand more and more coal for power production will lead to price increases as customers bid for more limited supplies.
One of the places in the United States that is most suited for responding to the opportunity is my new home state of Virginia and its neighbor in West Virginia. The state hosts a well established coal mining and transportation network that can take massive quantities of coal out of the mountains and ship it to one of the largest coal terminals in the US in Newport News. I fully expect that the rail traffic will pick up during the next few weeks, perhaps diverting shipments that would have supplied power plants inside the state. That is the nature of free markets, the suppliers can and should sell their product to the highest bidders.
Just yesterday, I heard a radio commercial from the head of Allegheny Power, my local supplier. It started off by saying that electricity prices have been increasing due to investments required to bring existing coal fired power plants into compliance with clean air regulations and because the price of coal has increased. I would bet that commercial was recorded before the flooding effect was known. It is time to brace for more increases since fuel cost adjustments can be almost automatically passed on to consumers with little delay or regulatory scrutiny.
That radio commercial then continued with advice on how to reduce consumption in order to lower bills. Since I live in a well-insulated, nearly new home with energy efficient lights installed throughout, I am not sure what more I can do to reduce our consumption. I suppose I could turn the thermostat down to 64 or 63 instead of the 65 that we have already selected. A better plan for us is to adjust the budget to allow for higher electric bills. I am fortunate to have a good job that enables me to make that choice; not everyone has the same flexibility. I sure hope that Allegheny has some favorable long term contracts locked in place.