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It’s a Cold, Cold World

Published on: 18/11/2016

“The Gods must be crazy!” we may think, looking at the odd weather patterns we’ve had all over the globe in recent years. This year’s winter arrived particularly early and is here to stay. For North Asia (think: China, Japan, Korea), that means a more-than-the-expected consumption of coal, gas and oil in order to sustain the population in the long, cold months to come.

Why So Cold?
Every few years the planet experiences the ENSO, a weather phenomenon that alters the regular air and ocean currents in the Pacific. When the air and surface of the ocean become warmer than usual, this is referred to as the El Niño phase. Right now we are experiencing its counterpart, La Niña, which consists in colder than usual meteorological conditions. We are set to experience a long, hard winter between 2016 and 2017 due to this phenomenon. Meteorologists even predict the next two winters might also pass in a similar fashion.

Energy Demands
Because it got colder than normal and sooner than expected the energy demand in many countries has risen sharply. Fuel in the form of coal and gas is sometimes used for heating directly, but it’s also a necessary component for the production of electricity in many places. Countries with rich resources have been pressed to extract larger amounts, not only for their own needs, but to export to importing nations too.

The price of coal is twice higher within the last few months in the Asian region. China, under pressure of domestic production limits, has been forced to import large quantities of the commodity. In Japan and South Korea, for instance, refined oils such as kerosene are commonly used, leading to a spike in the demand and supply of refined oil.

The market is mobilizing not only for this season, but for the possibility of two or three more harsher than normal winters. This is very much unlike the winter of 2015-2016 which was generally mild and contributed to the problem with oil prices, dragging them further down.

The price for natural gas in Asia are at their yearly highest right now. China has vowed to increase its gas supply by nearly 10% compared to last year at this time, according to Reuters. China is an interesting case because due to its record levels of air pollution it’s been trying to decrease its coal usage and production by imposing restrictions, leaving gaps in supply that now have to be compensated for using other types of fuel.

Coal supply levers in Japan are normal, thanks to the country’s reliance on kerosene. South Korea imported slightly more coal than usual in October, but has since reduced that.

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