Factors Driving The Coal Industry Forward

Energy analysts downplay coal as a fuel source and are quite skeptical about its prospects. However, President Trump can become a game changer for the coal industry with his promised relaxation of emissions rules.

Apart from the relaxation of stringent environment legislation, coal demand also benefited from the higher price of natural gas and improvement of coal prices in the global market. An increase in steel production from Asian countries like China and Japan will pave the way for shipments of metallurgical coal.

Per a report from the World Coal Association, there are currently 861 billion tons of proven coal reserves worldwide, implying that there is enough coal to last nearly 112 years at the current rates of production. Compared with this, proven oil and gas reserves are predicted to last around 46 and 54 years, respectively, at the current production levels.

The current availability of coal even outpaces the combined proven reserves of oil and gas. So, the advantages of coal cannot be overlooked and will definitely brighten the long-term prospects of investors.

Trump’s decision to walk out from the Paris Climate Agreement and repeal the Clean Power Plan should keep fossil fuel-based electricity generation afloat longer. Also, the recent Supreme Court ruling temporarily halted the implementation of the Clean Power Plan.

Let’s dig a little deeper into the factors driving this industry.

Coal Dominates U.S. Power Generation 

Coal is still among the major sources of fuel for electricity generation in the United States. Per the U.S. Energy Information Administration (EIA), total U.S. coal consumption will increase 0.9% from 2016 levels to 683.7 million short tons (MMst) and to 708 MMst in 2018.

Apart from an increase in consumption of coal in electricity production, the EIA forecasts prices of coal to gradually increase for electric production. The price of coal is anticipated to increase from $2.11 per million Btu in 2016 to $2.15 per million Btu in 2017 and to $2.19 per million Btu in 2018.

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