Kingsnorth Protest Shows Coal's Importance To Energy Crisis

These people want to make the energy crisis worse!

Date 08/08/2008

The Right Side

Ben Traynor

Tomorrow’s a big day for some people. And not because it’s the proper start of the Olympics.

No, tomorrow, Saturday 9 August, has been designated a Day of Action. A gang of activists will gather at Kingsnorth power station in Kent. I suspect there’ll be the usual brigade of young idealists in Gordon Brown masks, jester’s hats — and the ubiquitous man-with-a-megaphone.

Below, colleague Garry White gives his view, and explains how this could actually be good news for investors.

Now, if these Kingsnorth power station protesters do get their way, your household energy bill will soar. Even further than it has already.

You see, this "Day of Action" is designed to prevent the building of a new coal-fired power station. The protesters don’t like coal. Of course, most of the coal haters also don’t like nuclear either. Or gas. When it comes down to it, seem they don’t seem to like electricity full stop. Maybe they think Britain can run without it...

Unfortunately for them, that’s nonsense. Thankfully, the government seems to realise this:

"We are not going to sacrifice fuel poverty on the altar of climate change," says energy minister Malcolm Wicks.

The stark truth is we need coal. It’s not a neat, perfect solution — but we don’t live in a neat, perfect world.

If Kingsnorth is held up, it will be a further blow to Britain’s already ropey energy plan. Remember two weeks ago, when the energy firms pushed up their prices?

Well, EDF is in the news again this morning. Listen to this — while EDF hiked gas 22% and electricity 17%, in France the rise was far more muted. That’s because the French government has capped price rises at 5% for electricity and 2% for gas.

There’s a strong suspicion that EDF is using the British market — where there are no caps — to compensate for not be able to pass on costs in France. In effect, we’re subsidising the French.

We need an energy strategy that doesn’t leave us overly reliant on other countries. Increasing our coal-fired capacity would be a step on that road.

I was chatting about this with Garry White, our commodities man who covers the energy sector. He reckons the Kingsnorth protest may actually serve to highlight our pressing need for coal.

"Coal may seem like a bit of a step back in time," he says. "I mean, blimey, even Arthur Scargill’s in the news again! But it’s cheap, it’s proven and we have plenty of it, right beneath our feet. The energy crunch means we can’t afford to be picky — we need coal."

Which is exactly why Garry has the stuff in his portfolio.

Read his piece, and discover why the looming energy crunch brings not only danger, but also a great opportunity for investors.

Oil down, dollar up

Oil rallied yesterday. Back up above $120. However, it has fallen back again. My colleague Frank Hemsley has been watching the market, so I asked him what was going on:

"Well," he says, "yesterday’s spike was caused by pipeline sabotage in Turkey. The thing’s on fire now, and, though it’s under control, it could constrict supply for up to 15 days." That’s why the spike happened. But the trend was quickly reversed by a rally for the dollar.

"Jean-Claude Trichet made some dovish noises," says Frank, referring to the head of the European Central Bank. "So the markets have cut their bets on a European rate cut. That pushed the euro down, and gave the dollar a boost."

Frank reckons there’s a lot of volatility ahead in currency markets. As the big economies disintegrate, ‘hot money’ will slosh back and forth between them. That creates the perfect conditions for currency traders to make large, quick profits.

If you think you might be interested in playing the currency markets, then check out the ad immediately below, and follow the link:

That’s all from Fleet Street Daily today.

Tomorrow morning I’m going to tell you about three investments that I believe offer great value at today’s share prices.

Make sure you don’t miss it!

Until then

Ben Traynor

Editor

The Daily Reckoning — Homage to Jacques Rueff

What surprises us about this market is that anyone finds it surprising.

Lenders lent to people who couldn’t pay the money back. Naturally, the loans went bad; what’s surprising about that?

Consumers spent more than they could afford. Naturally, they ran out of money and have to cut back. Do you see anything unusual about that?

Wall Street partied for years on cheap credit. Now, credit is becoming harder to come by. Is it any wonder that they’ve had to turn off the music and close down the bar?

Yesterday, the Dow slipped 224 points, after the giant insurance company, AIG, announced a bigger-than-expected loss. AIG got taken down more than at any time since the company went public in 1969.

You can read the Daily Reckoning in full here.

P.S. If you enjoyed this article you can find out more about our free email, The Right Side by clicking here.

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