Around the world, mining and energy companies are beginning to fail. Many of these companies were set up when their output values were extremely high and therefore margins could be maintained even when costs rose. Many mining companies have struggled as the recession has meant raw materials have fallen in price, a few years ago the Chinese and others would buy everything they produced but now excess production merely exacerbates the growing stock piles further reducing the price.
One sector that has had particular problems is that of coal, where the costs have stayed the same or risen whilst the cost of coal has fallen due to demand and the fall in price of other energy sources. The US coal sector is in a “structural fall” which has sent 26 companies bust in the past three years, according to financial analysts. The world’s largest private coal company, Peabody Energy, lost 80% of its share price.
These declines were in spite of the Dow Jones industrial average growing by 69% during the same span. Authors said this indicated a decoupling of US economic growth.
Co-author Luke Sussams said the coal industry have been pummelled by affordable shale gas and also a series of Environmental Protection Agency (EPA) regulations.
“It was something of a one two punch. Gas took the legs out in the sector along with the EPA actually held it down,” he said.
80% were fallen by the United States shale gasoline cost since 2008. Meanwhile, renewable energy has gotten more and more competitive. From 2005 to 2013 the amount of US electricity generated by burning coal fell by 10.5%. These statistics have been repeated and reinforced particularly by some recent documentaries that have aired on the BBC, you can access these on iPlayer using something like this site recommends to hide behind a fake IP address.
Vitta said the drop in share prices noted by Carbon Tracker was due to a complicated series of variables, including a cyclical dip in metallurgical coal demand. He explained despite the slowdown “coal will continue to be an integral element of the power portfolio. It’s likely to get just a little smaller so the share price will fall. But there is constantly likely to be a location for coal”.
An integral portion of the argument was the idea that carbon intensive fuel sources would become less precious because of increasingly stringent regulation from international and national bodies. Many companies would be left holding vast reserves of fundamentally useless fossil fuels by this. A theory called ‘stranded assets’.