Thread by @GurleenKaur_19

COAL SHORTAGE~ A Thread🧵

To tackle Covid & it's widespread economic impact; Gods of the financial developed world, started printing almost unlimited money.

They printed more than ever, more than needed.

This created various asset bubbles including equity & commodities.

Once economic activity resumed all across the world with fervor.

Consumption started at neck breaking speed.

If we look at GDP growth projections of India or China, it was unthinkable one year back.

Because of money available at 0 interest rates & thanks to complex derivatives

People started buying commodities many months ahead.

This was visible in silver squeeze few months back. Then crude oil started inching up.

OPEC has its own politics & side show with Russia.

Both the blocks use energy price to get their docket going.

In this crisis; Putin directly tried to show Europe~ How incompetent the EU leadership is in anticipating & mitigating risk.

The thing with energy products except crude oil is that production can’t be ramped up overnight & storage is costly.

OPEC will not increase crude oil production even by 2-3 MBPD as their worst ordeal is Oil going back to Sub 40 levels & settling there like a hibernating bear.

So they have to play energy scarcity to be relevant.

Gulf Countries including Saudi are running huge fiscal deficit & they have crisis of unemployment at home.

Prices of NG started going up; rather started galloping up by 40% this month.

Europe loves NG as its considered environment friendly.

Also; prices of NG are much easy to manipulate & Russia has huge reserves & is kind of a market maker.

So, when Natural Gas prices sky rocketed; it developed into a big crisis & now people will suffer in cold if the situation is not sorted before winters.

Plants are being shut down as there is no availability of gas.

For Electricity production in developing world; both Coal & NG is used.

If we talk about India, most of our coal is imported~ Partly because we never had coal sector reforms & that our power plants are in awe of Australian brown Anthracite coal.

After NG prices sky rocketed; China tried to maximize coal based production.

As I said~ Shortage & transportation of coal is a time consuming process.

Very soon China reached a stage where they had no coal for power plants

In Indian states like UP, which are totally dependent on coal based plants; power cuts are scheduled & they have closed 12 plants.

Today Power Ministry & Coal Ministry had a meeting with all major power producers & Govt admitted that they have only 4 days of inventory left.

Going a bit into the technical details; all the Private Power Generation Companies have long term PPA (Power Purchase Agreements) with various states for 15~25 years; which are won on lowest bid basis.

So any sudden hike in input cost like Coal or even NG will make the power producing company unviable of loss making.

So it's in the interest of Power Producing Companies to shut down the plant rather than run it at a loss~ on one pretext or another.

Govt PSUs like NTPC has very poor plant load factor & they can't ramp up quickly.

Goldman has already given a report in which they have talked about spot coal prices to go 100% or more higher from these levels within a year.

So if coal & NG prices keep going up with an amplifying effect then our plants will have to be shut down.

We will have tough winters.

Especially; In villages~ as our irrigation is also dependent on power & agriculture can be affected.

As analysts keep talking about~ Commodity inflation & it's Tsunami; we might see one small Tsunami this winter.

But all this can be avoided if Biden shows some leadership:

Talks to Saudi~ MBS (Hint Khashoggi)

Talks to Russia & stop cornering Putin for no reason.

This entire energy crisis can be avoided in less than a week.

America is losing the leadership & its showing on world stage.

For Us~ Peasants.

WINTER IS COMING!