US Fossil Fuel Supply Up

David Roberts’ latest blog post discusses a recent decision by the United States government to open 28 new coal mining leases at ridiculously low prices.

If these new coal leases go through, that will add 10.2 billion tons of coal to the US supply. Burning that will result in 16.9 billion tons of CO2 emissions.

I learned from the last part of the article that under the Obama presidency fossil fuel supply in the United States has gone up. It has risen every single year.

That’s bad news for the climate. Most of the fossil fuel needs to stay in the ground. Increasing supply is moving in the wrong direction.

But it is also bad news for the fossil fuel industry. The large increase in oil supply evident from Roberts’ graph obviously is one of the reasons for recent downturns in oil prices.

Do fossil companies want lower oil prices?

Of course not. Their profits per unit go down. And the valuation of their reserves go down.

That’s Phaseout Profit Theory, the solution for the global warming problem.

As far as coal is concerned, the coal companies should just pass on the opportunity of developing any of these 10.2 billion tons of new coal leases. That will, all things equal, lead to higher prices for their product.

And the American government should set the prices for these new leases at fair market value, as opposed to the sweet deals they gave to the coal industry in the past. If they do so, they will also have a natural interest in increasing coal prices, since that increases that market value.

It’s been 239 years since the Declaration of Independence. The government should leave some coal in the ground for Americans living in 2254 (239 years from now).

Published by kflenz

Professor at Aoyama Gakuin University, Tokyo. Author of Lenz Blog (since 2003, lenzblog.com).

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