Post by
no1coalking on May 20, 2008 8:36pm
Coal'S on FIRE
ALL COAL RESOURCES MUST BE DEVELOPED 3 minutes ago China's power plants running out of coal
By JOE McDONALD 05.20.08, 3:06 PM ET
BEIJING -
Chinese power plants are running out of coal, with less than a three-day supply in some areas, the government said Tuesday, adding to China's logistical headaches following a devastating earthquake.
It is the second time in three months that Chinese power plants have run short of coal, an unintended effect of government-mandated price controls - a throwback to communist central planning - to shield the public from rising global energy costs.
Some 32 power plants have already shut down due to lack of fuel, the State Electricity Regulatory Commission said in a report. It said two were in Sichuan province, where last week's magnitude 7.9 quake damaged the power supply grid.
In February, freak snowstorms caught power plants without adequate coal supplies, causing blackouts and factory shutdowns in a country that relies on coal for 70 percent of its electricity.
Utility companies have let coal stocks dwindle and are buying less fuel after Beijing froze power prices last year, while allowing the market-set costs producers pay to rise.
The SERC gave no indication as to how Beijing might respond to new shortages. An employee who answered the phone in its press office referred questions to the Cabinet's National Development and Reform Commission. The NDRC did not respond to requests for comment.
The government created an agency this year to oversee energy policy, but it has yet to take any action.
Beijing has also frozen retail prices of gasoline and diesel. That helped farmers and the urban poor, but it has spurred sales of gas-guzzling luxury cars and propelled double-digit annual growth in fuel consumption.
Oil refiners say they are suffering heavy losses and some began cutting production last year, causing fuel shortages in parts of China's south.
Industry observers have pointed to especially strong demand for diesel, as some of the stricken areas in China now rely on generators for power.
Analysts use the price of heating oil futures to track the cost of diesel, which is chemically similar. This week, the cost of heating oil for June delivery surged to record highs, helping propel gasoline and possibly even oil futures higher, analysts say.
After rising all month, the price of heating oil rose another 14 cents per gallon to $3.6989 on the day after the quake.
"It's turning into a more defined demand for diesel fuel ahead of the Olympics," said Jim Ritterbusch, president of oil trading advisory firm Ritterbusch & Associates in Galena, Ill. "They appear to stockpiling."
Power plants in the eastern province of Anhui have less than a three-day supply of coal, while those in Beijing have about a week supply, the electricity agency said. The recommended minimum is 15 days; a seven-day supply is considered dangerously low.
In Sichuan province, where the May 12 quake killed tens of thousands of people, power plants have only a seven-day supply of coal, according to the agency. It said two plants have none