The United States and the rest of the world need cheap and abundant energy to spur economic growth, improve standards of living, and, more generally, improve people’s overall well-being. Abundant energy is critical for businesses to remain competitive in today’s global markets. That is particularly true for the technology, manufacturing, and transportation sectors of the U.S. economy.
The U.S. is rapidly becoming a digital economy that runs on electricity. Our technology-based economy must have inexpensive, abundant energy. Fortunately, the U.S. is blessed with energy abundance. America has over 200 years of recoverable oil reserves, centuries of recoverable natural gas deposits, and vast coal resources. Make no mistake: Coal will be part of the energy mix of the U.S. digital economy and the global economy.
Coal is no longer a four-letter word. At the moment, prices for coal are depressed. Investment in coal has withered away as banks and investors, bowing to the green lobby, refuse to fund new spending on coal-based production. But demand for coal continues to rise in the U.S. President Donald Trump and members of his Cabinet see coal as an important part of America’s energy equation.
Interior Secretary Doug Burgum said earlier this week that the U.S. is considering using emergency authority to bring back online coal-fired plants that have been closed and to stop plans to shutter other coal-fired plants. The Trump administration wants to keep every coal plant operating. Demand for energy in the U.S. is being supercharged by the so-called hyperscalers who are investing heavily in the artificial intelligence revolution.
Demand for cheap energy by Alphabet-Google, Amazon, Microsoft, Meta, Open AI, and other advanced technology companies is accelerating. Energy demand in the U.S. and globally will grow about 50% or more over the next two decades. That is several times faster than the growth rate seen over the past 20 years. Because demand for inexpensive energy continues to grow rapidly, America’s Energy Information Agency confirmed that demand for coal has yet to peak.
In January, the U.S. electric power sector consumed 7% more coal than in January 2024. The EIA has increased its forecast for coal demand by 4% from 2024. In addition, coal demand will be higher than expected because of the very high natural gas prices expected for this year, according to the EIA. Natural gas prices are high because of the demand for U.S. LNG and because of very cold winter weather. Utility companies are switching from natural gas back to coal. This increase in coal demand is causing U.S. coal plants to draw down stockpiles. Coal supplies will fall by 7% while U.S. consumption rises by 3%, according to the EIA.
Because coal supply is limited, prices for domestic coal should increase. Coal equities are out of favor. For risk-tolerant contrarian investors, investing in coal stocks could be profitable, particularly in this period of extreme volatility. Globally, coal demand is also being revised higher. The International Energy Agency has raised its forecast for coal demand higher for each of the last four years. Global coal demand will remain strong through 2027, according to the IEA.
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But global supply is constrained while demand is rising. As noted, investment in new coal mines has been discouraged. It is true that surging investment in renewable energy sources is reducing demand for fossil fuels, including coal, but not enough to offset demand for cheap readily available abundant energy. Arguably, U.S. and global coal prices are going higher. The EIA projects that U.S. coal prices will gradually increase each year through 2050.
Coal has the potential to be a moneymaking bet. Despite what the green lobby would have us think, coal, indeed, is no longer a four-letter word.
James Rogan is a former U.S. foreign service officer who later worked in finance and law for 30 years. He writes a daily note on the markets, politics, and society. He can be reached at [email protected].