• 3 minutes e-car sales collapse
  • 6 minutes America Is Exceptional in Its Political Divide
  • 11 minutes Perovskites, a ‘dirt cheap’ alternative to silicon, just got a lot more efficient
  • 5 days Does Toyota Know Something That We Don’t?
  • 4 days World could get rid of Putin and Russia but nobody is bold enough
  • 15 hours America should go after China but it should be done in a wise way.
  • 6 days China is using Chinese Names of Cities on their Border with Russia.
  • 8 days Russian Officials Voice Concerns About Chinese-Funded Rail Line
  • 8 days OPINION: Putin’s Genocidal Myth A scholarly treatise on the thousands of years of Ukrainian history. RCW
  • 8 days CHINA Economy IMPLODING - Fastest Price Fall in 14 Years & Stock Market Crashes to 5 Year Low
  • 7 days CHINA Economy Disaster - Employee Shortages, Retirement Age, Birth Rate & Ageing Population
  • 8 days Putin and Xi Bet on the Global South
  • 8 days "(Another) Putin Critic 'Falls' Out Of Window, Dies"
  • 9 days United States LNG Exports Reach Third Place
  • 9 days Biden's $2 trillion Plan for Insfrastructure and Jobs


The leading economics blog online covering financial issues, geopolitics and trading.

More Info

Premium Content

Crash In U.S. Natural Gas Prices Incentivizes Power Plants To Ditch Coal

  • There are emerging signs across the Western world that 'gas-to-coal switching' could be reversed.
  • Plunging natural gas prices are making the fuel more attractive for power generation once again.
  • Henry Hub NatGas prices crashed 12% on Wednesday as cold weather cleared out of the U.S.

Global coal use jumped to a record high this year because of the sharp increase in natural gas prices. This prompted a wave of fuel switching away from NatGas by utilities for power generation, pushing up demand for price-competitive options, including coal, in many countries.

There are emerging signs across the Western world that 'gas-to-coal switching' could be reversed, perhaps only temporarily, as warmer weather is expected across Europe and the US. 

The latest 2-week outlook for the Lower 48 is above-average temperatures for the first half of January. 

Europe is also expected to record warmer temperatures than average for the next two weeks. 

As a result, Henry Hub NatGas prices crashed 12% on Wednesday as cold weather cleared out of the US. This means utilities will become more incentivized to burn NatGas (also more 'green') for power generation than coal. 

Even in Europe, NatGas prices are well below the costs for coal. That wasn't the case several months ago. 

"Cheaper natural gas prices are negative for coal producers, whose product competes against gas for electricity generation," Bloomberg said. 

Houston-based energy firm Criterion Research said coal-to-gas switching would increase if NatGas prices remained under $7 million British thermal units (MMBtu). 

As natural gas prices weaken at the onset of 2023, we revisited the last few years of data for the United States thermal stack, which includes coal and gas generation. Throughout 2022, natural gas managed to hold 60-70% of the thermal stack while Henry Hub futures remained above $7.00. However, when prices were in the $5-7 range, natural gas was able to post a few days in the 70-75% range. 

With that in mind, if we see prices remain below $5 throughout much of 2023 and natural gas supply within the US continues to hold onto its 100+ Bcf strength, we could continue to see coal burns pushed out of the stack in favor of higher natural gas usage.

Energy traders are dumping coal stocks in anticipation of the switching. The Russell 3000 Coal Subsector Index plunged 10% on Wednesday. 


Major coal companies were also dumped. Peabody Energy fell 11%, Alpha Metallurgical Resources -8.8%, Ramaco Resources -8.3%, Arch Resources -8%, and Warrior Met Coal -8%. 

For now, declining NatGas prices means a reduction in coal burns and a transition back to higher burn rates for NatGas. Falling NatGas prices indicate lower electricity prices across the board, a relief desperately needed for many folks across the West.

By Zerohedge.com

More Top Reads from Oilprice.com:

Download The Free Oilprice App Today

Back to homepage

Leave a comment

Leave a comment

EXXON Mobil -0.35
Open57.81 Trading Vol.6.96M Previous Vol.241.7B
BUY 57.15
Sell 57.00
Oilprice - The No. 1 Source for Oil & Energy News