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This isn't true just of me; it's true for all of D.C. The television news reports and op-ed columns never reveal the true face of Washington politics. The real D.C. is hidden behind a wall of silence and secrecy. There isn't a soul in the city without a story to tell and a confidentiality agreement to protect it.
Aside from the legal problems, whistleblowing is political career suicide. The D.C. job market rewards those who can keep their mouths shut, and potential whistleblowers are carefully scrutinized. Job candidates are typically run through an ideological gauntlet. If a Congressman or lobbying group finds that one strongly disagrees with just 15% of their positions, there's almost no way to get the job. Leaks here are a serious business, and trust is often more important than any other qualification.
During my time in Washington, I recall attending a mentoring session for young libertarians and conservatives. The speakers shared advice on a career in Washington. One suggestion was, "Do not write about politics, and do not have a blog. It's the worst decision ever for your career." And the speaker was absolutely correct. If someone searches your name online and finds that your political beliefs do not match their own, your chances of getting the job become practically zero. So, there are two options: don't write at all; or write on topics that follow the party line. Otherwise, at best, one's future holds a prestigious position as the director of communications for the National Association of Hubcap Distributors.
When one turns on the news or reads an article, the piece has already been filtered by these incentives. Anything worth saying can't be said. And no one wants to write a real opinion - only the party line.
Furthermore, the risk/reward tradeoff for the whistleblower is extremely bad. If one breaks a story about the inside workings of a D.C. organization, the press gets an entertaining story for the next week. Everyone soon forgets about it and nothing changes for the better. However, the writer is left in a pile of legal trouble and facing career ruin. Unless one is exposing the crime of the century, it doesn't pay to be the sacrificial lamb for the political entertainment "news."
Well, surely someone has written on what happens behind the scenes. There are some revealing works out there. My favorite has to be the comedy Thank You for Smoking, a fictional story of a tobacco-industry lobbyist. One may watch target="_blank">whole movie in parts
. (On a side note, it's no coincidence that the story is "fictional." Don't forget the confidentiality agreements.)
My experience on K Street was frighteningly similar to Thank you for Smoking, but the film fell short on one way. It showed the tobacco industry as a manipulative organization conjuring questionable studies and manipulating the public at every turn. And many critics of the movie falsely believe that the movie is only a criticism of the tobacco industry. In reality, the exact same tactics are the standard from labor unions to your favorite cancer organization; everyone is overexaggerating their case and specializing in ways to manipulate the public.
D.C. as whole is simply a giant fraud and theater for the masses. None of it is genuine. Every speech, position, and research study is manufactured by some group of analysts and writers. This experience has forever twisted my perspective of politics. When I hear a president quoted - whether it's JFK, Reagan, or Obama - I don't think to myself, "Man, what a great, inspiring quote". Instead I think, "Wow, what a great speech writer. If only his opponents were lucky enough to have the same team of writers."
My disillusionment is at its worst near Washington's tourist sites - particularly the statues with presidential quotes. The tourists read the quotes in awe and snap picture after picture. But there I am thinking about the absurdity of these monuments. The statues are built to remember a man, and the words carved below it aren't even his own. I guess even in death, the charade must go on.
Well, I hope that wasn't an overly depressing introduction. Perhaps an article on world coal supply and demand from the Casey Research energy team will cheer you up.
The World's Supply and Demand for Coal
By the Casey Research Energy Team
Coal prices are surging ahead even as most other commodities pull back, spurred on by expectations that metallurgical and thermal coal production will again fail to meet rising global demand this year. The result? Record profits for major coal producers like Xstrata, a surge in acquisitions from coal-hungry India, Chinese electricity shortages, and a raging carbon tax debate in Australia amid record investments in that country's coal-heavy mining sector.
The price spikes in the second half of 2008, which were completely unsustainable and disappeared rapidly in the recession, distort the picture. So instead, imagine the above graph without those peaks. What you get is an almost sustained ascent in the spot prices of thermal and metallurgical coal over the last four years. Metallurgical coal, which is used to make steel and is also known as coking coal, has almost doubled in price, climbing from just above US$80 per ton in mid-2007 to more than US$160 per ton today. Thermal coal, which is burned to generate electricity, has risen from the US$45 per ton range to almost US$80 per ton.
There are a couple of countries that really take notice when coal prices start to rock. Australia is the world's biggest coal exporter and relies on thermal coal for 80% of its electricity. China mines more coal than any other country in the world but still imports more to support its power and steel-making needs - the country mines and burns more than three billion tons of the black stuff annually. And India - where the economy is growing at 8% annually - is facing multimillion ton coal shortages even as it works to halve a 14% peak power deficit within two years.
Let's start with Australia, a country embroiled in a debate over newly introduced carbon taxes. Those taxes are set to come online in mid-2012, ahead of a cap-and-trade system that could begin as early as 2015. Proponents say the tax is necessary to force a coal-reliant country to move toward cleaner energies. However, the tax has drawn widespread criticism from the nation's huge coal industry. Australia supplies 19% of the world's thermal coal and 59% of its coking coal; these industries are worth A$18 million and A$40 million, respectively (2009 numbers). With coal prices expected to keep rising for the next few years at least, Australian coal miners had big expansion plans. Instead, if the carbon tax goes ahead, the industry says it will have to close mines, meaning major tax and job losses for the nation. Opponents of the tax also say it will make Australia's own energy more expensive and less reliable.
Another argument against the tax is that reducing Australia's coal output could in fact increase global carbon emissions, because power stations in China and India would simply use dirtier coal to fill the gap. Australia's thermal coal is perhaps the best in the world, with high energy content and few impurities. Thermal coal from Indonesia has only 70% of the energy value of Australian thermal coal, which means that much more coal would have to be mined, processed, and shipped.
In the context of this very current, heated debate - the Australian coalition government is set to meet this weekend to hammer out the details of the tax - a new report from the Australian Bureau of Agricultural and Resource Economics and Sciences shows that planned investments in the country's mining sector have soared to a record A$173.5 billion. The figure represents development plans for 94 projects, including 35 mineral projects, 35 energy projects, 20 infrastructure projects, and four processing projects. The Bureau estimates A$55.5 billion in mining-industry expenditures in the current year alone.
A fair chunk of these investments will come from coal companies, who have money to spend because the current coal prices are providing record profits. Xstrata, the world's largest exporter of thermal coal, is expected to report an 83% gain in net income this year, according to a Bloomberg compilation of analysts' expectations. Another good example comes from Arch Coal (N.ACI), which recently tendered a $3.4 billion offer for International Coal Group (N.ICO) aimed at creating Australia's second largest metallurgical coal producer.
China is another major coal producer, but there the issue is coal shortages. The country's economy is steaming ahead at a 10% growth rate, and that kind of development requires a lot of steel. This year alone China is facing a shortfall of 56 million tonnes of metallurgical coal - the country is expected to produce 513 million tonnes, but consumption will reach 569 million tonnes. The Asian giant imported 47 million tonnes in 2010, helped by a 278% increase in imports from Mongolia. And even though domestic coking coal production is expected to increase by 80 million tonnes per year by 2015, China's latest estimates predict a 100-million tonne annual shortfall in coking coal by 2015.
It is not just coking coal that China needs. Shortfalls in thermal coal supplies are main culprit in an expected 30-million kW summer power deficit. And the problem is exacerbated by the fact that the country's electricity pricing system has not kept up with coal price increases. Plants sell electricity to the State Grid Corp. of China (SGCC) at a set price, and SGCC then resells to consumers. But the set price has not kept pace with coal prices. As such, coal-fired generators lose money for every ton of coal they burn, which is not exactly an incentive to produce more power. Over the past three years, China's top five state-owned power generating plants have lost some 60 billion yuan, while SGCC posted a 40-billion yuan profit last year alone.
China is expecting to face its worst power shortage in years this summer. Widespread droughts, which have decimated the country's hydropower capacities, are not helping. As many as 20 provinces and territories have already been put on power rationing, including the country's industrial heartland. Some 44 major industries in Zhejiang (a manufacturing hub near Shanghai) have been told to limit consumption or face prohibitive tariffs. The story is much the same in Guangdong, south China's manufacturing hub. And producing more coal is not an option - the government has acknowledged that China is near its peak coal production capacity.
To continue on a familiar theme, India is also facing an acute coal shortage. In April, for example, the nation imported 32 million tons of thermal coal against a total requirement of 36.9 million tons. At the end of March, 26 of India's thermal power stations reported having only critical stocks of coal, including ten stations with fewer than four days' worth of fuel. On Monday the prime minister convened an emergency meeting to discuss the coal shortages, which are expected to total 112 million tons over the next 12 months.
India has been working to address the coal void for some time now. Indian firms have been scouring the globe for coal assets and the effort has secured several major deals: Indian conglomerate Adani is set to buy the 25-million-tonne-per-year coal export terminal as Abbot Point in Queensland, only a year after buying the Galilee coal project in Australia for $2.7 billion; Indian trader Knowledge Infrastructure signed a joint venture deal with Indonesian miner PT OSO International to develop thermal coal mines in Kalimantan; and three Indian firms are among those shortlisted to buy Australian coal explorer Bandanna Energy, a deal expected to top $1 billion.
Coal India, which produces 80% of the country's coal, is not going to be left out of the shopping spree. A few months ago the company set aside $1.2 billion for overseas buys, specifically in Australia, Indonesia, and the U.S. And it has the money - net income for the first quarter totaled $931 million and full-year profits were up 13%. Shares in Coal India started trading Nov. 4 after the government raised $3.2 billion by selling a 10% stake, in the country's largest public offering to date.
The story could go on, discussing other coal-needy countries like Japan, South Korea, Germany, and so on, but perhaps the point has been made. Global production is maxed out with respect to existing infrastructure, so increases from here can only occur as quickly as new mines, rail lines, and ports can be built. Coal prices have been climbing steadily, based on real supply constraints, and most industry watchers agree that they will hold their ground or continue to climb for the next few years.
Those countries with coal should count their blessings.
[Whether the subject is coal, nuclear, or alternative energy resources, Marin Katusa and the rest of the Casey Research energy team dig deep to find the best power plays to invest in. Test-drive Casey Energy Report today; it's risk-free for ninety days. http://www.caseyresearch.com/cm/middle-east-oil-crisis?ppref=CDD407XX0611D" target="_blank">Learn more here.]
