The Weekly Wrap: November 19, 2010

Peak coal in China. First it was rare earths, now it’s coal: Ravenous China is using so much coal that it’s considering a cap on production of the fuel, writes David Winning in the Wall Street Journal. China accounts for some 47 percent of the world’s coal consumption at the moment, and its 2010 imports of the fuel are already higher than all of last year. In fact, here is an area of unaccustomed Chinese global weakness: Wholly fixated on energy security to the extent that it’s willing to burn domestic coal with abandon, China is facing a coal deficit — it will run out of the fuel sometime in the next two to three decades at current rates of consumption, according to Winning’s sources. The United States, meanwhile, has some 240 years of reserves, and India has about a century’s worth. As a result, China may turn more fully to imports, while capping production at current levels.

The oil boom town of Havana? Moscow was Cuba’s closest ally for decades until the Soviet collapse, when Russia simply didn’t have the money any longer to support its foreign friends. Now, Gazprom is moving in to fill the gap. The Russian gas giant is joining a half-dozen other companies in a rush to explore for oil in Cuba’s waters, writes the New York Times’ Andrew Kramer. Since Gazprom has no actual experience drilling offshore, its oil arm, Gazprom Neft, has bought a 30 percent share of acreage controlled by Malaysia’s Petronas, which will handle the actual work. Other companies drilling include Spain’s Repsol, India’s ONGC, Norway’s Statoil, Venezuela’s PdVSA, and Vietnam’s Petrovietnam. China’s Sinopec is working onshore in the country. No U.S. companies are present because of a 48-year-old trade embargo. President Barack Obama has been allowing a thaw in relations, but that is likely to slow given the composition of the new Congress, in which more members are opposed to closer contact with Havana.

Peak confusion. The Saudi kingdom is reacting to a fresh spate of reports predicting a waning of global oil supplies and a corresponding spike in prices. In a talk at Rice University, Prince Turki Faisal said that, regardless of China’s and India’s growing demand, Saudi Arabia will use its massive resources to keep global oil prices stable, according to Business Insider. "As the demand for oil continues to rise, especially in China and India, the kingdom has every intention of meeting that demand," Turki said. His remarks came the same week as an International Energy Agency report that conventional oil production has peaked, and higher prices are on the way.

Tony Hayward’s next chapter. Run out of BP after mangling the company’s public message during the Macondo oil spill in the Gulf of Mexico, former CEO Tony Hayward is setting up a private oil consulting firm, called 3E Capital, writes James Quinn of London’s Daily Telegraph. Hayward is also serving on the board of TNK-BP, BP’s Russian joint venture.

Tariff-supported ethanol industry boosts exports. The U.S. agricultural lobby and its congressional supporters have long argued that American corn ethanol producers cannot stand on their own feet — they need a government subsidy, which currently stands at 45 cents a gallon. Yet it turns out that U.S. producers have been churning out so much of the fuel additive that there is a surplus, and they have been exporting this bounty at record volumes, writes Gregory Meyer of the Financial Times. Nearly four in 10 bushels of this year’s corn crop will become ethanol fuel, according to the U.S. Department of Agriculture. Of that, government mandates add up to 12 billion gallons of the fuel, but the industry is on track to produce some 13.6 billion gallons this year, while Americans are driving less. So it is that, according to government data, the industry had exported some 250 million gallons of ethanol as of Sept. 30, more than double the entire figure for 2009. Rob Vierhout of ePure, a European ethanol trade association, said the subsidized exports are not fair, and that the group may seek to stop the United States from allowing them.