According to the British Petroleum Statistical Review of World Energy, 2013, global coal reserves declined in the decade ending 2012:
Figure 1. Proved coal reserves.
Proved reserves of coal are generally taken to be those quantities that geological and engineering information indicates with reasonable certainly can be recovered in the future from known deposits under existing economic and operating conditions.
If we look at supply and demand factors in the decline, we can see that:
a) Coal price has grown significantly in the decade ending 20121:
Figure 2. Prices in US Dollars per tonne.
b) Coal consumption has also grown significantly worldwide2:
Figure 3. Coal consumption by region.
c) The price of substitutes (i.e. Natural Gas) has also grown. Not so in North America though, but if we look at the world trend it is growing3:
Figure 4. Natural gas prices.
Therefore if the rule of supply and demand worked we would see increase in proved reserves for coal, because increase in demand with increase in price creates change in demand curve:
Figure 5. Demand and supply increase.
That would logically increase supply which we don’t see in case of coal reserves. We don’t include consumers’ income determinant here, because coal is not part of the residential energy market.
Therefore decline in reserves is possibly not due to supply & demand factors, but due to other primary factors, including:
As to the next 5 years “forecast”, the price of coal will grow which reflects the growing costs of production, transportation and processing. Growing demand for coal with the declining supply will also contribute to the price growth. Following table demonstrates this assumption4:
1 BP Statistical Review of World Energy, June 2013, p.30
2 BP Statistical Review of World Energy, June 2013, p.33
3 BP Statistical Review of World Energy, June 2013, p.27
4 EIA Annual Energy Outlook 2013
Proved reserves of coal are generally taken to be those quantities that geological and engineering information indicates with reasonable certainly can be recovered in the future from known deposits under existing economic and operating conditions.
If we look at supply and demand factors in the decline, we can see that:
a) Coal price has grown significantly in the decade ending 20121:
Figure 2. Prices in US Dollars per tonne.
b) Coal consumption has also grown significantly worldwide2:
c) The price of substitutes (i.e. Natural Gas) has also grown. Not so in North America though, but if we look at the world trend it is growing3:
Therefore if the rule of supply and demand worked we would see increase in proved reserves for coal, because increase in demand with increase in price creates change in demand curve:
That would logically increase supply which we don’t see in case of coal reserves. We don’t include consumers’ income determinant here, because coal is not part of the residential energy market.
Therefore decline in reserves is possibly not due to supply & demand factors, but due to other primary factors, including:
- The exhaustion of the easier to develop coal reserves;
- Carbon dioxide credits that increase costs of new generation resources using coal;
- Political regulations related to environmental issues.
As to the next 5 years “forecast”, the price of coal will grow which reflects the growing costs of production, transportation and processing. Growing demand for coal with the declining supply will also contribute to the price growth. Following table demonstrates this assumption4:
1 BP Statistical Review of World Energy, June 2013, p.30
2 BP Statistical Review of World Energy, June 2013, p.33
3 BP Statistical Review of World Energy, June 2013, p.27
4 EIA Annual Energy Outlook 2013
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