Coal Is Still King of the Energy System: Elements by Javier Blas
Consumption of the most-polluting fossil fuel on course to set record in 2023
Hi, I’m Javier Blas and this is today’s edition of Elements, Bloomberg’s new energy and commodities newsletter. We bring you a daily mix of commentary from Bloomberg Opinion writers and the best of our market-leading news coverage. We hope you’re enjoying it, and if you haven’t yet signed up to get it direct into your inbox, you can do that here.
Today’s Take: Coal is still king
This Sunday marks the 110th anniversary of the beginning of one of the most important energy transitions. On July 31, 1912, Winston Churchill, then Britain’s First Lord of the Admiralty, established a Royal Commission on Fuels and Engines to explore shifting the Royal Navy from coal to fuel oil.
Churchill convinced the navy to abandon coal-fired steam boilers. And over the next century, the world energy map transformed itself, first through the rise of oil and later to solar and wind power. The ecological movement became a major political force, pushing the fight against climate change.
And coal? It’s still there, king as always.
The International Energy Agency this week said global coal demand in 2022 will match the all-time high set in 2013 of about 8 billion metric tons. And next year, coal consumption will set a fresh record high.
It bears repeating: global demand for coal, the most-polluting fossil fuel, is still rising. The gap between the reality of the coal market and the well-intentioned words uttered at climate conferences has never been wider.
And it isn’t just absolute demand. Even as a share of the world’s primary energy, coal consumption remains robust. Last year, coal accounted for 27% of the world’s primary energy, a couple of percentage points higher than two decades ago, and about the same level as 50 years ago.
With demand rising – in part due to Russia’s invasion of Ukraine – and supply stagnant, the world is paying a steep financial cost for coal alongside the environmental toll. In Europe, coal prices this week surged to a record above $400 per ton.
As important as the surge in spot prices is the fact that the whole forward curve has moved much higher in recent weeks. If in March, just after Russia’s attack, the market saw a short-term rally, now it’s betting on sustained high prices through the rest of 2022, into 2023 and even 2024.
It’s an increasingly expensive addiction the world just can’t seem to kick.
--Javier Blas, Bloomberg Opinion
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