The holiday season is a time of reflection for many people. They express gratitude for what they have as they close the books on one year and remain hopeful as another begins. In general, this was a good year for the coal business worldwide. That’s especially noteworthy as the green movement and policymakers continue to encourage society to turn its back on fossil fuels. Sadly, much of the success the industry experienced this year was brought about by the Russian invasion of Ukraine and not a more sensible approach to energy diversification.
Energy issues had already become a concern before the war started in late February. Society was moving more toward electrification. However, intermittent sources of renewable power, wind and solar generating systems were stressing the grid in Europe and the U.S., but power providers had natural gas as a backup. Or so they thought.
For the first time since World War II, society saw the weaponization of power. Russia threatened and then eventually reduced natural gas supplies. Natural gas prices began to spike. With winter approaching, Europeans began to fear something that they only see in the developing world, large-scale loss of power. While that has not materialized yet, power prices increased exponentially, which had a knock-on effect: inflation.
Sanctions and boycotts of Russian fossil fuels related to the war in Ukraine disrupted markets for many commodities. Society had forgotten how much was mined, farmed, made and produced in Russia and Ukraine: grain, coal, steel, potash, nickel, palladium, etc. Prices for all commodities, including steam and metallurgical coal, surged and inflationary pressures grew. The war also highlighted the fragility of supply lines that was originally exposed during COVID-19 and how dependent many countries had become on others, who may not always be so friendly.
Beyond the tragic death and destruction in Ukraine, the war impacted almost everyone. Cheap energy was a luxury many in the developed world took for granted. For those that are old enough to remember, this year rekindled memories of oil embargoes of the 1970s, and the inflation and soaring interest rates of the 1980s. Natural gas prices were high during that period too. The solution was energy diversification. A buildout of coal and nuclear power alleviated those issues.
The situation is expected to remain the same for the next few years. As China awakens from a COVID-19 induced hibernation, prices for fossil fuels (and many other commodities) could surge again. One of the best hedges for inflation is reduced energy costs, and that’s best achieved through energy diversification. Hopefully, people and policymakers have a newfound respect for the security that coal provides.
We at Coal Age would like to wish you a safe and festive holiday season and a happy new year.