Coal

Demand declines in heavy industry and the utilities have subdued previously existent growth.  Elective output cutbacks and those potentiated by regulatory and new construction limitations have been apparent and are likely to continue in 2009.  A substantial portion of production emanating from the Appalachia regional is currently at issue in a case currently under review by the U.S. Court of Appeals.

China's economic  expansion-driven demand for energy will be sustained although perhaps at a lower level than in recent years, providing correlative demand to that for Petroleum products.  Their Coal exportation surplus has dropped exponentially during the past several years, evidencing  increasing potential dependency upon costlier international sources.  Importation has not reflected this demand, as anticipation of the requirement has been underestimated, resulting in increasingly frequent power outages and power rationing in various regions of the country.

China has imposed domestic price controls below the cost of Coal generated power production, an endurable situation for the state run power companies.  Many smaller power companies, however, have been shut down, unable to sustain their operations.

In the U.S., innovative technologies have reduced plant emissions by as much as 70% in recent years.  Political obstacles, based on the clean energy movement, have limited facility expansion.  The Reality Coalition, a project of a 5 member alliance which includes the Sierra Club, is currently waging an aggressive television campaign against the Coal Industry.   The U.S. government has funded The Clean Coal Power Initiative in support of the Industry and facilitation of newer technologies, such as Carbon Sequestration and Coal Gasification, in meeting increasing energy needs.  IGCC (Integrated Gasification Combined Cycle) facility development has engendered increasing interest, with multiple planned  projects in the U.S., and the advantage of additional revenue generation through bulk chemical sales.

 

Renewable Energy

Growth in the Wind, Solar, and other Renewable Energy areas continues at a rapid pace.  Corporate revenues continue to push valuations higher, while margins in the wind turbine generator industry are projected to expand during the next 1 – 2 decades.  Raw material costs are rising, however, as demand in these areas continues to advance at a greater rate. 

Technological advances drive the industry, as Wind Turbine Generator manufacturers offer an array of products including 5 MW units, increasing durability, gearbox-free designs, and increasing efficiencies.  Germany, the U.S., Spain, India, and China installed wind power capacity lead globally, where the U.S. is the most rapidly expanding market.  Overall Wind Turbine Generator efficiency has increased with design advances.  Preservation of farm land usage and increasing global mandates for clean energy will drive industry expansion well into the future.  Renewable Energy Industry participants are closely watching Federal Tax Credit legislation, as 2008 marks its expiration in the U.S., and considerable debate exists as to the likelihood of extension.  Superior service and warranty support options continue to add value. 

Subsidies, rebates, tax credits and rising fossil fuel costs have served to increase Solar technology competitiveness in the marketplace, however, natural gas parity in the long term, relative balance-of-systems needs, and Semiconductor Industry driven polysilicon supply and pricing issues continue to affect growth.  Solar cell advances beyond Photovoltaic technology (PV), which is dependent largely upon the classic polysilicon-based flat plate design, target, for example,  thin-film  and Concentrator Photovoltaic designs, among others.  The former is subject to raw material sourcing, efficiency, and reliability issues, while the latter continues to require silicon-based PV materials, although in lesser amounts, and does offer simpler cooling systems, fewer components and moving parts, and a more compact footprint based upon reduced focal length.

Nuclear energy is viable and cost competitive, however, political considerations resulting from safety issue concerns have limited growth.  The Biofuel industry is expanding, with notable enthusiasm as to future prospects.  Recent increases in grain and fertilizer prices raise issues which include efficiency factors and long-term commercial viability. 

 

Significant increases in fossil fuel prices have induced reprioritization of interest and investment in Alternative Energy.  Near-term parity considerations, subsidy and tax credit continuance, as well as fossil fuel price fluctuations will be of increasing importance in these flourishing industries as they procure substantial global power generation market share.

 

Petroleum

April 14, 2009

After peaking in the low $50's, the Crude Oil nearby contract is presently hovering at or about the $50 range.  Demand continues to cool as further indicated by the IEA report Monday.  OPEC is said to be satisfied with $50 oil for the moment, indicating lesser probability of output reduction.  Contrary to the picture in 3Q, 2008, the positive correlation with stock market indices and economic recovery enthusiasm has resumed.

Gasoline and distillate stocks will show a decline, according to some analysts, while Crude Oil inventory projections are up ahead of the API and EIA reports  forthcoming within the next 2 days.  IEA has cut its daily demand projection by 1 MM BPD.

Oil exploration operations are experiencing a slowdown as a result of budget cuts, although formerly elevated service overhead has moderated in accordance with lower Crude Oil prices and the economic environment.  March U.S. Retail Sales dropped unexpectedly to 1.1%.

Heating Oil may be in a recovery pattern, currently at 1.43, while Natural Gas, at 3.60 May, continues a steady decline.  Brent Crude is exhibiting strength in the 53 range today.

March, 2009

Crude Oil has staged a recovery to the $47 - 48 range, based upon the likely forthcoming announcement of additional supply cuts by OPEC, Nigerian oil shipment delays, and fluctuating demand with recent overall declines since 2008.  Brent Crude has most recently resided in the mid $40's area.  Heating Oil continues its decline to the 1.25 range for the April contract.  Natural Gas, after the July, 2008 peak at $12 dollars, has been fairly steady in the $4 range.


February, 2009

Crude Oil prices have descended to the mid 30's (March contract), suggesting continued weakness driven by increasing supplies and decreasing demand stemming from the global economic situation.  OPEC has progressively decreased their output during the past 6 months in an effort to support prices, with progressively increasing declines of 0.5, 1.1, and 2.2 MM b/d initiated in October, November, and January, respectively.  The next OPEC meeting is scheduled for mid-March.

Natural Gas prices have declined due to decreasing demand as well, despite an early and cold winter in the U.S.

The Service and Equipment sector has lowered their prices, consistent with the parallel Crude Oil price based trend.  Although this is facilitating exploration more within budget, budgets have diminished in the industry, with continued slowing of exploration projected in 2009 as compared to 2008 levels.