The Van Eck Vectors Coal ETF (KOL) jumped to its highest price since early November following President Donald Trump’s executive order on Tuesday to try to roll back Obama-era energy regulations aimed at reducing coal production.
KOL rose as high as $14.02 on Wednesday, its highest price since Nov. 9 when it traded to $14.74, the day after Trump’s election. Trump’s order seeks to undo Obama-era policies such as the Clean Power Plan, which limited power-plant emissions and coal mining on federal land, as well as regulations on fracking.
Barclays’ analysts say on face value the executive order “should be viewed as more bullish for coal and more bearish for competing generation types in the power sector such as natural gas, renewables, and nuclear.”
The share price for the United States Natural Gas Fund ETF (UNG) rose 2 percent on Wednesday, swept up in the gains for other fossil-fuel trades as Trump seeks to unshackle the energy industry from what he claims is burdensome regulations.
But energy-market watchers say don’t get swept up in the push to loosen regulations on coal because there are limits to how much policy can change market dynamics that have been decidedly bearish on the fuel. That also goes for natural gas, which is likely to be affected more by short-term weather patterns and seasonal demand than environmental policy.
The new executive order allows for some quick changes, Barclays says, such as lifting the coal-mining moratorium and no longer factoring in climate change in environmental reviews. But it believes the move won’t have much market impact.
“Given the significant difficulties the U.S. coal industry has faced, companies are unlikely to look to expand their reserves, even with the coal moratorium lifted. Not factoring in climate change . . . will serve Trump's broader goal of lessening regulation in the energy sector but are unlikely to have immediate market effect,” they say.
John Person, president of the online trading site NationalFutures.com, says advisors shouldn’t bet on coal becoming the go-to energy source it once was. The infrastructure of U.S. utilities has changed to natural gas from coal over the past several years as natural gas has remained cheap.
“We’re getting near energy independence with the ability to not force electric companies to rely on just one or two sources,” he says. “There are all different sources they can switch to, but at the same time they can’t just turn off a light and say fire up the coal burners.”
The Energy Information Administration, the statistical arm of the U.S. Department of Energy, says coal and natural gas each provide 33 percent of the U.S.’s electricity needs, with nuclear power providing 20 percent and renewables the rest.