Will Coal Surpass Oil in the Global Energy Mix?

Coal’s share of the global energy mix will come close to surpassing oil as the world’s top energy source by 2017, the International Energy Agency’s annual Medium-Term Coal Market Report argues.earnings

“Although the growth rate of coal slows from the breakneck pace of the last decade, global coal consumption by 2017 stands at 4.32 billion tonnes of oil equivalent (btoe), versus around 4.40 btoe for oil, based on IEA medium-term projections,” states a press release for the report.

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“The IEA expects that coal demand will increase in every region of the world except in the United States, where coal is being pushed out by natural gas,” it adds.

This doesn’t necessarily come as a surprise to industry observers or investors who have been bullish on coal’s mid- and long-term prospects. The shale gas boom in the U.S. started pounding nails into coal’s future in the country a while ago, and a wide-spread collapse in coal stocks that began in 2011 reflects this.

Major coal stocks such as Alpha Natural Resources (NYSE:ANR), Arch Coal (NYSE:ACI), and Peabody Energy (NYSE:BTU) have fallen between 60 and 85 percent over the past two years, and only began to find a floor toward the end of 2012.

Competitive pressure from cheaper and cleaner North American natural gas has been exacerbated by an increasingly tough regulatory environment. The Union of Concerned Scientists recently released a report arguing that 353 coal-fired power generators (representing 31 percent of coal-fired generators, 18 percent of the coal-generating capacity, and 6 percent of the nation’s total power capacity) were “ripe for retirement and should be considered for closure.”

The U.S. Government Accountability Office also issued a report that suggests EPA regulations could shut down as much as 12 percent of America’s coal-fired capacity. Between natural gas and regulatory pressure, coal companies have turned their eyes overseas.

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“Thanks to abundant supplies and insatiable demand for power from emerging markets, coal met nearly half of the rise in global energy demand during the first decade of the 21st Century,” said IEA Executive Director Maria van der Hoeven in a statement about the report.power plant energy

“This report sees that trend continuing. In fact, the world will burn around 1.2 billion more tonnes of coal per year by 2017 compared to today – equivalent to the current coal consumption of Russia and the United States combined. Coal’s share of the global energy mix continues to grow each year, and if no changes are made to current policies, coal will catch oil within a decade,” she continued.

Growth will be focused in massive developing economies such as India and China. Despite its smaller size, India is expected to lead in demand for coal imports because of environmental concerns in China. Even Europe, which has low CO2 prices and high gas prices, is expected to increase its demand for coal imports.

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