Coal Stocks and the Election

Written By Brianna Panzica

Posted November 6, 2012

It’s Election Day in America.

And as we get ready to find out which new president we will welcome into the White House come January, the markets have been getting ready too.

And one of the markets that’s been particularly active since the presidential debates is the coal market.

This sector of the energy market has been performing rather poorly this year. With the surge in domestic natural gas production, coal plants have been pushed to the side.

Natural gas, of course, burns cleaner. It’s still a fossil fuel, but its greenhouse gas emissions are just a fraction of those from coal. Carbon dioxide emissions from coal plants are double that of natural gas plants, nitrogen oxide emissions are five times as high, and sulfur dioxide emissions are ninety times higher.

And now that the U.S. has an abundance, it’s cheaper. In April, the domestic price of natural gas dropped below $2 per mmBtu for the first time in ten years. It became cheaper than coal, an a number of coal-fired plants began switching to natural gas as a result.

Coal production decreased while exports increased. Climate scientists experienced a shock when CO2 emissions fell to a twenty-year low.

It looked like coal was headed for a slow trek out.

But in the month leading up to the election, coal stocks have told a different story. The Market Vectors Coal ETF (NYSE: KOL), rose more than 9%. Alpha Natural Resources (NYSE: ANR) shot up 46%. Peabody Energy Corporation (NYSE: BTU) gained nearly 30%.

And a lot of this occurred after the debate in which coal was discussed. Mitt Romney’s comments about his support for coal had a big effect on investors.

From ETF Trends:

“These stocks have been volatile, but you can’t discount what a man running for president said about coal. Call it the Romney rally,” Sterne Agee analyst Michael Dudas said in a Reuters report.

MarketWatch’s Michael Kahn even goes so far as to say that the market is predicting a Romney win.

He looked at the Dow Jones U.S. Coal Index, which “has already broken out to the upside,” while other coal stocks are on the way back up as well.

Meanwhile, the Powershares Wilderhill Clean Energy ETF (NYSE: PBW), a largely U.S.-based clean energy ETF holding stocks that would benefit from a win by Barack Obama, is at an all-time low. It lost 2% in the last month.

The EPA might be preparing for a Romney win too.

From the Examiner:

“More than 50 EPA staff are now crashing to finish greenhouse gas emission standards that would essentially ban all construction of new coal-fired power plants. Never before have so many EPA resources been devoted to a single regulation. The independent and non-partisan Manhattan Institute estimates that the EPA’s greenhouse gas coal regulation will cost the U.S. economy $700 billion.”

This rapid rush to finish the project could be out of anticipation that the EPA will not have another four years to restrict carbon emissions from coal. If Obama wins, they shouldn’t have an issue completing the regulations.

But the coal market doesn’t seem to care. It’s rallying before the election, with Market Vectors’ ETF up 0.5% today, Peabody up 1.82%, and Alpha up 2.78%.

But the Clean Energy ETF is also up 2.3% on the day of the election. Both sides appear confident in the final hours.

That’s all for now,

Brianna Panzica

follow basic@brianna_panzica on Twitter

Energy & Capital’s modern energy guru, Brianna digs deep into the industry with accurate and insightful updates into the biggest energy companies and events. She stays up to date with the latest market moves and industry finds, bringing readers a unique view of current energy trends.

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