I have to come clean about something…
Last month, after the EPA announced its new regulation for carbon emissions, I said, “Call it the death kiss for American coal.”
Unfortunately, I was wrong…
What I should have said was that it was the death kiss for American coal plants.
American coal is still alive and well despite the fact that recent EPA regulations have made new coal plants too expensive to build and the older plants barely worth keeping around.
But what about the coal itself?
Since we still have about 481 billion short tons of coal reserves available for mining throughout the United States, miners will still be extracting the resource — especially when emerging markets and other nations abroad are clamoring for cheap energy.
And just as we predicted, the coal industry is deciding to ramp up exports. Interestingly, our coal exports haven’t been going to India or China. Instead, we’ve been helping another pro-green, environmentally friendly nation increase their carbon emissions by 1.2%: Germany.
Although they operate in the EU, where carbon emissions are sacrilege, they have had to import more coal over the last year after curtailing some of their nuclear output. Moreover, the country has a placed a ban on coal mining that starts in 2018, which will increase demand from domestic and regional consumers.
And the U.S. government has been keen on pandering to its environmental base by trying to cut emissions from power plants while simply exporting the pollution to Germany. Over the last six years, U.S. exports of coal to Germany more than doubled.
This increased demand from Germany — a renewable energy powerhouse in its own right — has already had its affect on our gross exports…
Still, I wouldn’t bet on American coal stocks rebounding anytime soon. They may not have much momentum right now, as the EPA continually hammers the industry, but no matter how pessimistic you are over the future of coal, never forget that this fossil fuel will play an enormous role in meeting the world’s energy demand over the next several decades.
But even though we’ll eventually reach the bottom for coal, the sentiment that natural gas is the better bet will still put pressure on coal prices in the short term.
Until next time,