Global Energy Crisis Leads U.S. Coal Prices to Two-Year High


According to government data released Monday, the global energy crisis is already affecting U.S. coal markets. Thus, coal from the Appalachia region rose $2,20 to $73,25 a ton for the week ending October 1.

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Indeed, prices hit a two year high, up 35% from the start of the year and the highest since May 2019. The U.S. Energy Information Administration pointed out this was due to surging demand and years of supply cuts. 

The EIA also noted that prices in other regions are lower; however, those are also following the same upward path. 

To curb emissions, but to remain competitive

As Bloomberg also indicated today, natural gas prices are prompting U.S. utilities to switch to coal this year. However, these companies’ ability to fire up coal power plants is constrained by miners’ capacity. Indeed, they have cut capacity by 40% over the past six years, told Reuters Lucas Pipes, an analyst with B Riley Securities.

Indeed, this reduction in the coal power’s workforce comes as the world steps up efforts to curb climate change. The long-term outlook for this fossil fuel is thus grim and U.S. producers of this fossil fuel have been closing mines; similarly, they are considerably reducing output.

Moreover, US coal production has been falling steadily since 2008, with total production this year expected to reach about 601 million tons. Although that’s up significantly from 2020, it’s still well below 2019 levels.

However, even if demand remains strong next year, miners may struggle to increase supply.

More coal as winter is on the horizon

Nevertheless, rising concerns over winter on the horizon and higher gas prices, will continue to keep upward pressure on this fossil fuel as well, Bloomberg stated. 

Hence, Pipes wrote in a research note Monday that investors are underappreciating structural changes in the North American energy landscape. According to him, those transformations “could lead to these higher prices persisting for some time.”

Notably, “a dramatically smaller coal generating and mine supply footprint,” is particularly impacting the energy sector. Furthermore, “that limits gas-to-coal switching,” Pipes adverted.

The US is not the only country coupling with this problem. The global energy crisis has also sparked demand for coal worldwide. Therefore, consumption from US electricity producers could climb 23% this year, according to the EIA. As utilities burn through their stockpiles, inventories at power plants are on track to fall by more than half. 

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