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.