Jim Thompson

Email Jim at jim.thompson@ipulpmedia.com

Sorry about that, but the energy news is coming thick and fast for all of us these days.

I am sure you remember old Jim telling you to carefully preserve your boilers, regardless of what form of energy they consume (I have also said these are the only types of idled assets to save). I hope you have heeded my advice.

It appears the rapid transition to "Green Energy" sources appears to have some problems. Just this week, Germany is talking about restarting some coal fired boilers because of their natural gas situation. Denmark is, too. Also, at least one state legislator in Illinois is suggesting their state legislature should consider restarting some shut down coal assets.

According to the US Energy Information Administration, coal consumption, for all uses, peaked in 2007 at 1,127 million short tons. It had declined to 447 million short tons in 2020 but rose 20% in 2021 to 545 million short tons. Reports are consumption is rising further this year.

China remains the world's largest coal consumer at 4,456 million short tons per year (2020, latest data available).

"Green Energy" is a right and noble goal in theory, regardless of your views on climate change. How we get from theory to practicality inclusive of economics is another matter.

One of the main contributors to inflation these days is the cost of transportation fuels. It is not just you going to your favorite restaurant for dinner, everything must be transported in order for the economy to function. Thus, the rise in the price of gasoline and diesel are important to us all in industry and privately.

Some sources are reporting that electric vehicles will be 45% of the US vehicles on the road in 2035. I view such statistics with suspicion. Have you checked any statistics for anything today against what was forecast in 2009? I doubt it--2035 is still too far out for statistics to have any meaning. Electric vehicles are still a very tiny portion of the market today.

Bottom line is at the end of the day, economics and pragmatism will win out once again, despite big speeches and legislation. We are not going to stop consuming much of anything we consume today, unless there is a widespread interrupter such as war.

This means, as a manager and as an individual consumer, one must be prepared for turbulence in the markets caused by regulators attempting to redesign our energy use patterns. Indeed it will be disruptive, and some businesses and individuals will get caught in bad places.

A good lesson here in the state of Georgia is the Nissan Leaf. Not so long ago, they were everywhere, for the state had a significant tax break for purchasing electric vehicles. Now, ten-year-old models can be bought for around $7,500. Why? The battery replacement cost is $5,500 and most of them this age will need a new battery.

Nothing is free and most things are not easy. Do not let your company or you get caught up in matters that do not make economic sense.

Be safe and we will talk next week.

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