Making sense of trends and data

Nat Gas killed Coal, not Regulation

Published 6.22.2016
Barry Ritholz discusses the reason for coal's decline, which happens to agree with LWRAS's view that the problem in the coal industry is not the result of regulation. Rather, coal has been displaced by lower cost fuel— principally natural gas.

Ritholz also points to the large debts the companies were/are carrying. And the fact that coal is a very dirty source of energy. Here is where the regulation effect would be to the extent that there is one, as 29 states have efforts to increase the use of renewable energy sources over fossil fuels. On the other hand, plenty of people want energy from a cleaner source.

However, it's the effect of cheaper natural gas that really killed coal. Because utilities switch en masse to natural gas. Yes, they may have also realized some tax benefit for doing so, but the bottom line is the bottom line. If natural gas was more expensive than coal, the switch would not have been so complete.

Less demand = fewer fossil fuel jobs

States that heavily rely on fossil fuel production have seen job losses as the market switches to a renewable energy focus. Natural gas, despite displacing coal has also seen a loss of jobs, as prices have declined to the point where it's no longer economical to pull it out of the ground.

This effect too is blamed on government action, and certainly the Obama administration prefers renewable source to fossil fuels. But again, if the prices for renewables weren't declining, fossil fuels would still rule. Of course, in Kansas, market effects are begin amplified by the states failing austerity experiment. Outside of states that rely on fossil fuel production (or have self-inflicted austerity wounds), the job market is improving.

So that's the bad news in the state employment data. And it is bad, if you live in one of the affected states. Pretty much everywhere else in the U.S., though, things are looking up. The biggest oil and gas producer (and No. 6 coal producer), Texas, is still adding jobs, at a slowing but healthy 1.6 percent annual pace. That's because it has a huge economy with lots going on besides energy production. The same goes for California, the No. 3 oil producer, with 2.8 percent annual growth. And the same goes for the U.S., where employment grew 1.9 percent over the 12 months ending in January -- down a little from the 2.2 percent pace of a year before, but not bad at all.

Some states are just plain booming. Seventeen states experienced faster job growth than the country as a whole over the 12 months ending in January, and four saw growth of more than 3 percent.


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