US President Trump quickened his efforts to rescue coal country by pulling the U.S. out of the Paris climate accord last week. But he is not solving the immediate threat coal faces from its archenemy like cheap natural gas. Trump also praises for the Shale Revolution, and it has made natural gas so sufficient and affordable that coal tries to compete with it.
That trend is proceeding the same still now. Last week, the Natural gas prices dropped another 9%, and that is the worst week since last November’s election. It is now down more than 18% this year. Since February 2014, the Prices had reduced by more than half.
To restore coal, Cheap natural gas will make Trump’s promise, and this can be done even slightly more environmentally friendly “clean coal” and also that much harder, analysts said.
Michael Roomberg, the portfolio manager of the Drill Bit, said,
“Clean coal is fiction in a low natural gas price world.”
The U.S. power plants pay the prices for natural gas plunged 71% between 2008 and 2016. Recently, the Coal prices were down just 8% over that span. So only the Trump’s deregulation push is being undermined by the decline in natural gas prices.
Darin Newsom, the senior commodities analyst at DTN, said,
“People are going to have a hard time making the argument to switch to coal if natural gas gets cheaper,”.
Newsom blamed the latest discounts for natural gas to concerns about too much supply and near-record production.
Darin also said,
“We have an oversupply situation. There’s just no reason for prices to go higher,”
Baker Hughes says that the number of natural gas drilling rigs have grown by 122% over the past year and some of the new supply is yet to come from the Permian Basin.
It is a shale oil hotspot that also produces lots of natural gas. Coal also gets hit by new competition from renewable energy sources like solar, wind and hydro. Trump’s own energy policies could add more trouble for coal.
The White House wants America to produce a domestic fossil fuel also adding natural gas. Trump said in a speech days before last November’s election.
“We will unleash the power of American energy, including shale, oil, natural gas and clean coal,”
The most recent plunge in natural gas prices suggests there may not be enough appetite to support more gas output.
“If we increase production and demand is not there, the market will have an issue with that,”
In another sight, this issue in Natural gas prices could remain cheap for some time. So there will be no matter how much Trump arrives to “love the coal miners,” there may be little he can do to change the fundamental laws of economics, related to supply and demand.