Electric power shortages caused by insufficient water levels at hydroelectric stations in some places, and unaffordable oil prices in others, have led to rationing, blackouts, and other problems.
China Resorts to punitive Prices to Curb Demand
Bloomberg reports China’s Zhejiang Plans Punitive Power Prices to Curb Consumer Demand
China will impose punitive power prices on businesses that exceed consumption limits in Zhejiang province, a manufacturing hub bordering Shanghai, to curb demand during an expected electricity supply shortfall this summer.
China faces the worst power shortage in seven years as the economy grows faster than forecast and some utilities cut production or shut, hit by rising coal prices and government caps on tariffs. Zhejiang, on the eastern coast to the south of Shanghai, is host to companies including automaker Zhejiang Geely Holding Group Co., owner of Volvo Cars.
The province’s 35.4-gigawatt generation capacity is 3.5 gigawatts short of what it needs during peak summer demand, the local government said.
High Coal Prices Cause Plant Closures
Please consider China’s Power-Capacity Utilization at Record Low
China’s power plants are operating at a record-low utilization rate as many have closed, potentially causing the most severe electricity shortage since 2004, Mirae Assets Securities said.
“Burdened by bulging losses, many power generators have shut,” Gordon Kwan, the Hong Kong-based head of energy research at Mirae, said in an e-mailed note today. “High coal prices and the capped electricity price have also reinforced fears” that power rationing may spread to manufacturing hubs including Guangdong, Zhejiang and Jiangsu, Kwan said.
China’s April electricity output fell from a seven-month high as the cost of coal rose. Prices of the fuel at Qinhuangdao port, a domestic benchmark, climbed for a sixth week as of May 9 to the highest in more than two years, according to the China Coal Transport and Distribution Association.
The country may face a summer shortage of 30 gigawatts as supply lags behind demand growth, the China Electricity Council said on April 29. That deficit is about twice the shortfall Japan faced after the March 11 earthquake, Mirae’s Kwan said.
Venezuela Plans Rationing
Bloomberg reports Venezuela Plans to Ration Power for Second Year
Venezuela will ration power again this year, planning steps similar to those taken in 2010 amid an energy crisis, Electricity Minister Ali Rodriguez said.
“We’re going to reapply the measures we applied in Caracas last year nationwide, which punishes the wasting of electricity and encourages energy savings,” Rodriguez said in an interview on state television today. Any rationing measures require President Hugo Chavez’s approval, Rodriguez said.
Venezuela has struggled to boost energy-generating capacity to keep pace with an estimated 6 percent increase in demand this year. The consumption jump, if it persists, would require an additional 2,000 megawatts of new capacity a year, which is “unsustainable,” Rodriguez said.
Energy Shortages Spreading
Please consider the ASPO May 23 Energy Review
Pakistan and China continue to top the list of countries with the most serious power shortages. Last week brought in reports of energy shortages developing or worsening in Egypt, Guyana, the Dominican Republic, India, Japan, El Salvador, Bangladesh, Libya, Mozambique, Nepal, Venezuela, Argentina, Zimbabwe, Kenya, and Tanzania. Most of the reported shortages are of electric power caused by inadequate water levels at hydro dams or insufficient coal, but some of these shortages stem from unaffordable oil prices or the inability to import sufficient quantities of liquid fuels.
In most countries, electricity shortages quickly translate into increased demand for gasoline and diesel as organizations strive to keep important activities such as computers, elevators, hospitals, refrigeration and even factory production functioning with back-up generators.
Pakistan probably is suffering the worst from electricity shortages, the country simply does not have enough foreign exchange to import large quantities of expensive fuels. China however is a different situation. Beijing is committed to maintaining its economic growth which it can’t do without increasing supplies of electricity.
The Chinese only report their oil imports and electricity consumption monthly so the complete picture of their energy situation will not be known for a while, but if past shortages are any indication we can expect imports to increase, perhaps significantly, in coming months. Beijing is being unusually open concerning the seriousness of its growing electricity shortages which are said to be the worst since 2004. Rationing of power has started and reports of production shortfalls are starting to appear. In the past year the price of coal has increased by 20 percent while electricity rates have increased by only 2 percent leading to substantial losses for many Chinese electricity producers.
Summer is nearing, and temperatures across parts of South Asia are already running above 40o C. so the use of air conditioning is putting further strains on power grids. Wide spread blackouts and lost industrial production can be expected this summer if current trends continue. The liquid fuel shortages being reported in a number of the world’s poorer countries suggests that demand may indeed be outstripping available supplies with the poorer countries losing out in bidding for available supplies.
The June OPEC meeting is likely to be an interesting one. Iranian President Ahmadinejad appointed himself Iran’s acting Oil Minister over the objections of the Iran’s Guardian Council and plans to chair the OPEC meeting where he may attempt to drive up oil prices by challenging any Saudi effort to increase production officially.
Rogers Predicts Oil Price to Rise “Beyond Anybody’s Expectations”
Speaking with the British BBC, last Tuesday 17 May 2011, famed investor Jim Rogers chairman of Rogers Holding said he believes that the oil prices will rise “beyond anybody’s expectations” in the foreseeable future and that America is in serious trouble.
I do not know how high oil prices go and in what timeframe. Nor does anyone else. However, I do know that the price of oil (and everything else) will not rise above people’s willingness to pay for it. Demand for oil will drop with rising prices.
Currently, much of the rise in oil has been speculation, just as it was in 2008. Rampant credit expansion and overheating in China has also contributed to higher prices. Near-term, slowing global growth seems likely to put a damper on prices.
Long-term, those who assume the Chinese economy can grow at 10 percent a year for another decade are in Fantasyland. Energy constraints will not permit it.
Mike “Mish” Shedlock
Click Here To Scroll Thru My Recent Post List