Coal Companies Record Surging Profits as Gulf Region Instability Drags On

Coal companies are making record profits as instability in the Gulf region continues to disrupt normal energy flows and force countries to seek alternative energy sources. The ongoing U.S.-Iran war has resulted in the closure of the Strait of Hormuz, a channel through which 20-25% of the world’s crude oil and petroleum passes every single day.

Countries reliant on fossil fuel imported from the Middle East are scrambling for suitable alternatives, especially now that Iran has said it will keep the Strait closed until the United States accepts its demands.

In South Africa, thermal coal producer and exporter Thungela said its half-year profits had doubled after the ongoing Middle East conflict forced countries to buy coal and supplement their energy supplies. Analysis by the non-profit energy think-tank Ember projects a worst-case scenario in which global coal output will increase by 1.8% by the end of the year.

Several countries worldwide are increasingly turning to coal to fill the gaps left by imported oil and natural gas, a trend that has worried many environmentalists. Coal is the dirtiest fossil fuel: burning a single megawatt-hour of coal generates around 2,200 pounds of carbon dioxide, as well as nitrogen oxides and sulfur dioxide, and toxic heavy metals like arsenic and mercury.

Most of the countries that are buying larger amounts of coal have pledged to move away from the fossil fuel to cleaner alternatives, but with global energy supplies constrained by the closure of the Strait of Hormuz, they are turning to coal, which may be dirtier than oil but is also cheaper.

In Asia, Japan lifted restrictions on older coal plants with higher emission profiles to deal with limited energy supplies. Bangladesh increased coal-fired electricity production after being forced to impose sweeping energy cuts, and South Korea has postponed the closure of coal-fired plants originally set to shut down by 2040.

Vietnam, the Philippines, and Thailand have also stepped up coal-fired energy generation to fill the gaps left by low natural gas reserves. India and China, which currently use a whopping 70% of global coal reserves, have experienced explosive energy demand in recent years and are tapping into coal to supplement their energy supplies.

In Europe, Italy has postponed its plans to phase out coal from 2025 to 2038, while Germany says it cannot risk jeopardizing its electricity production to keep climate promises made years earlier.

Indonesian coal companies have beaten the competition by a notable margin, with Australia and Russia taking second and third place, respectively. South African thermal coal producer Thungela saw its profits double between January and June, driven by surging demand and higher prices, and the firm predicts that coal prices will remain high as Asian and European markets get ready for winter.

Global markets are hungry for massive amounts of energy, and entities like GeoSolar Technologies Inc. could benefit from this explosion in demand if they come up with additional scalable renewable energy solutions that can sufficiently overcome the intermittency hurdle of solar energy.

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