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Coal Enters New Phase of Insecurity

Coal is the fastest growing source of energy across the world, as the developing world seemingly puts a new coal-fired power plant into operation as fast as they can build them. Coal provides 40% of the world’s electricity supply, and despite swift gains by renewable energy, it will remain a dominant source of power for the foreseeable future.

However, the ubiquity of coal belies the very real cracks in its foundation. Those weaknesses could portend a much graver future for coal than many realize.

Investors watching the energy picture in the U.S. are fully aware of the threat posed to coal from natural gas. After all, coal’s share of the electricity market dropped to just 38% in 2013, down from nearly half only five years earlier. Most of the blame for the loss in market share can be pinned on cheap natural gas.

The onslaught against the coal industry took a bit of a respite earlier this year, however. Natural gas prices more than doubled from their 2012 lows of less than $2 per million Btu (MMBtu), and in the winter of 2014, they spiked even higher due to the extreme cold.

For a while, natural gas prices remained elevated. Several states on the East Coast became concerned about their overreliance on natural gas, and due to a dearth of pipeline capacity, the dependence would expose their economies to volatile swings in natural gas prices.

This all worked in coal’s favor, which hoped to enter a period of revival this year.

Then…

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