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Market Forces
No, Trump Can’t Revive Coal

Peabody Energy, the world’s largest private coal firm, has seen its stock price jump more than 73 percent in trading since Donald Trump was elected. The thinking amongst investors is clear: a Trump administration will be more coal friendly than Obama’s has been, a sentiment echoed by the CEO Murray Energy Corp., another large American coal producer, who declared the election to be “a great day for coal miners and their families.”

There’s no doubt that coal has taken a battering in recent years. According to the EIA, in 2015 coal production fell 10 percent, coal consumption fell 13 percent, and mining jobs fell 12 percent—and that’s just one year. Coal has been steadily declining over the past eight years, but while it may be convenient and even politically expedient to lay this phenomenon at the feet of the outgoing President, that’s not what’s really happening here.

Let’s be clear about something: President Obama hasn’t dethroned Old King Coal, market forces have. More specifically, the shale revolution—not over-regulation—has killed coal. Hydraulic fracturing and horizontal well drilling set off an energy revolution beginning about eight years ago, and it’s no coincidence that the ascendance of shale gas has occurred simultaneously with the decline of coal. A domestic glut of fracked hydrocarbons has depressed natural gas prices here in the United States, and in so doing made natural gas-fired power plants a cheaper option in many places than coal.

That’s had environmental benefits in addition to providing households and businesses with cheaper power: natural gas emits roughly half the CO2 as coal does, and far fewer of the dangerous localized air pollutants. And, with the shale revolution showing no signs of going away (and indeed preparing for a resurgence), natural gas prices aren’t likely to rise anytime soon.

Donald Trump can roll back all the regulations he’d like when he assumes office, but that won’t save coal. The only thing the sooty rock has going for it is its cost—otherwise its a tremendously dirty option—but thanks to fracking, it can’t bill itself as the cheapest option anymore. Given all that, it could be smarter to short coal stocks rather than rushing to snatch them up.

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  • vb

    The Republicans, especially on the state and local level, should be straight with the miners without assuming the condescending tone of the environmentalist left. The should talk about their plans for adapting to a changing world, about job training and retraining for affected coal workers, about ways to bring new businesses to these isolated areas. The internet offers small companies a way to sell products directly to consumers across the country. They need to make coal country an attractive brand. Calling ard workers deplorables is not the way to go, Dems.

  • Burtcomma

    Funny thing about markets, they change quickly sometimes. There is a price at which coal is competitive with natural gas, and all sorts of things from demand to regulations to whatever all go into those prices. The real question is at what price level can coal be mined and used economically and at the level what is the coal production levels? Who forecasted the vast innovations in fracking and the vast reserves of oil and gas it revealed? Who knows what innovations await coal, its retrieval, or its use? The great thing about the future is that you never know. Take 2016 for example……..Meanwhile, maybe there are oil and gas fracking jobs that are in demand that we can help coal workers find.

    • SLEcoman

      In the US, coal-fired electric generating units (EGUs) can hold 30-33% market share (natural gas EGUs = 36-38% market share) when the Henry Hub natural gas price is ~$2.80/MMBtu (i.e. ~$16/boe). When the Henry Hub price is ~$3.80/MMBtu (~$22/boe), the coal-fired EGU market share = 37-39% market share and natural gas EGU market share = 27-31%. Its important to remember that nuclear power generation (19% market share) is very stable and hydroelectric (5-9%) depends on rain and snow pack. The balance is mostly other renewables (e.g. wind), which is variable. Oil produces ~0.3% of US power generation.

      • Burtcomma

        Thanks for the specifics. I understand markets in general, and some markets in terms of specifics. Not the energy market, however.

  • Frank Natoli

    President Obama hasn’t dethroned Old King Coal, market forces have
    Donald Trump can roll back all the regulations he’d like when he assumes office
    Buh, buh, I thought it was “market forces” that strangled coal? I guess the author doesn’t bother to read his own twaddle. Actually, I don’t blame him.
    The only thing the sooty rock has going for it is its cost—otherwise its a tremendously dirty option
    Well hardy-har-har. Now the author says that coal has cost going for it, which for us lifetime English speakers means market forces would prefer it. AND as for “sooty” and “dirty”, the author might search “stack scrubbers” and discover that no coal fired plants have emitted particulates in DECADES. But why bother getting smart before writing? It’s the Democrat way!

  • TGates

    Every day three mile long trains pass my house hauling nothing but coal from Appalachia. It is on its way to Hampton Roads for export to places such as Germany who in implementing its alt energy plan, including shutting down its nuclear energy plants, is bringing its coal plants back online. Id say that government energy planners are no more competent today than they were in the past.

  • Angel Martin

    All those who assured us Trump couldn’t possibly win, now they “elite’splain” us that Trump won’t be able to do anything.

    They have still not learned their lesson that liberal wishful thinking ^= fact based analysis.

  • SLEcoman

    The statement that coal is ‘tremendously dirty’ ignores the large strides made in pollution control technology over the last 40+ years, and the huge investments the US power generation industry has made in pollution controls. Particulate removal efficiency of 99.5% has been routine for coal-fired electric generating units (EGUs) for decades, and now many EGU’s particulate emissions are so low that it can’t be accurately measured. There are a number coal-fired EGUs that have NOx emissions <30 ppm. To put this in perspective, the EPA's NOx emissions limit for airplane jet engines is 200 ppm, which is equivalent to ~500 ppm when these emissions adjusted to the same basis as coal-fired EGUs (i.e. 5.0% O2). Where is the discussion of how 'tremendously dirty' jet airplanes are?

    Coal-fired power generation fell to 23.8% market share in March 2016 when the Henry Hub natural gas price averaged $1.73/MMBtu [i.e. $10.03/boe (barrel oil equivalent)]. But a natural gas price of $10/boe was not sustainable (who could have guessed?). By July, the HH natural gas price had increased 63% to $2.82/MMBtu ($16.36/boe), and coal-fired power generation market share had increased to 33.1%. Now does anybody really think that a natural gas price of $16.36/boe is really sustainable? Certainly not the oil/natural gas industry as there was no rebound in drilling activity even though natural gas prices were 60+%.

    Probably the best case cost scenario for natural gas is that the last increment (i.e. highest productgion cost) of natural gas will be from the Haynesville formation. It is generally believed that this natural gas can be produced at ~$3.40/MMBtu (~$20/boe) if oil prices are sufficiently high (i.e. natural gas liquids are an important revenue stream for natural gas drillers and NGL prices are linked to oil prices). At $3.40/MMBtu HH prices, the average delivered price of natural gas to power plants would be ~$3.750/MMBtu, and even new high efficiency natural gas fired gas turbine combined cycle (GTCC) EGUs have no chance of competing on a variable cost basis against old coal fired EGUs with an average delivered coal cost of $2.20/MMBtu (avg delivered coal cost in July '16 = $2.11/MMBtu). And when one considers that coal-fired EGUs are generally paid off while new GTCC EGUs have substantial debt service, it is apparent that coal-fired EGUs absolutely dominate if the economic 'playing field' is truly level. BTW, the US EIA predicts that the HH natural gas price will be $6/MMBtu in 2030 (constant $2015). Historically, coal prices have had a slight downward price trend on a constant $ basis because coal prices have increased less than the rate of inflation.

  • Tom Scharf

    All anybody wants in coal producing states is to be allowed to compete on an even playing field. Obama / EPA were putting their thumbs on the scales.

    • SLEcoman

      An example of ‘thumbs on the scale’ is the Mercury Air Toxics Standard (MATS) for coal-fired EGUs. This regulation has caused at least 50,000 MW (~14% of total) of coal-fired EGU capacity to close, and MATS will provide no measurable public health benefit (see “Mercurial Madness: Toxic Analysis and Double Standards” published in the Journal of American Physicians and Surgeons Volume 20 Number 2 Summer 2015).

    • Boritz

      And here is how they do it:

      “Meanwhile, green groups like the Sierra Club have fought hard to hasten the shift. Those efforts got a big boost last week when former New York Mayor Michael Bloomberg announced that he and other donors would contribute as much as $60 million to the Sierra Club’s anti-coal campaign.
      These trends reinforce each other: Increasingly strict air pollution rules make it more expensive to keep older coal plants running lessening their competitive edge against gas, wind and solar. In turn, that helps environmentalists argue that the soundest economic strategy is to close the plants, not upgrade their pollution controls — especially with the EPA climate rules approaching.” –politico.com

  • FluffyFooFoo

    I’ve read right here at TAI that demand for coal in green Germany is high these days. It can be exported.

  • http://abriefhistory.org MichaelKennedy

    The obsession with CO2 is part of the problem. CO2 makes plants grow. Global warming is a hoax driven by politicians and their funding.
    Get over it.

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