If the Laws of Supply and Demand can lower the Price of Coal it can lower the Price of Oil

Posted by PITHOCRATES - May 20th, 2012

Week in Review

Even energy responds to the laws of supply and demand.  Which is treating Australian coal pretty poorly now.  On top of being demonized and punished by their government.  Poor energy.  What has it ever done to deserve this?  All it has ever done was to make our lives better.  By increasing our standard of living.  And the thanks it gets?  It is reviled.  Ostracized.  And bullied.  Governments hate energy but they have no problem taking its money.  And they just keep taking more (see DJ Queensland Government Pulls Support For Coal Port Expansion by Cynthia Koons, DOW JONES NEWSWIRES, posted 5/19/2012 on London Stock Exchange).

The Queensland government has withdrawn its support for a 9 billion Australian dollar (US$8.86 billion) coal port expansion in the northern part of the state, in a sign the country’s resources boom is losing steam…

Rio and fellow mining giant BHP Billiton Ltd. (BHP.AU, BHP) have been complaining about the challenges and cost of doing business in Australia lately. The federal government has recently passed new mining and carbon taxes that will add to miners’ tax burdens. Labor shortages have driven up wages and labor disputes are hurting production at BHP Billiton’s Mitsubishi Alliance Queensland coal mines…

The price of Australian thermal coal has fallen recently, to around US$98 a ton, down 21% from its average price in the first quarter of 2011. Concerns about slowing demand from China have weighed on the price. A glut of natural gas in the U.S. has also pushed some U.S. coal into export markets while other major global thermal coal suppliers like Colombia and Russia are sending coal that would have normally sold in Europe into Asian markets.

The lesson to take away from all of this?  Besides governments demonizing energy so they can tax it more.  Energy responds to the laws of supply and demand.  Australian coal prices fell because demand has fallen in China.  And America is sitting on so much natural gas (and their government hates coal) that they’re putting more coal onto international markets.  More abundant the supply the lower the price.  And this bumper supply of coal is hurting the Australian coal industry.  (On top of their government hurting it, too).  The same would work for oil.  If only we drilled for it.  Yes.  Drill Baby drill.  Because if we bring more oil onto the international market we can lower the price of oil.  Just like we’ve lowered the price of coal.  It works.  Drill baby drill.  Because energy responds to the laws of supply and demand. 



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