Coal Shareholders: A Reality Check?

“I like coal,” said Mitt Romney at the October 3 presidential debate.

In the vacuum of other catalysts, coal stocks across the board popped the following day. James Rive Coal (NASDAQ:JRCC) closed up 11.7 percent, Arch Coal (NYSE:ACI) closed up 7.9 percent, Peabody Energy (NYSE:BTU) closed up 4.06 percent, and Alpha Natural Resources (NYSE:ANR) closed up 6.83 percent.

Ivan Glasenberg, the CEO of Glencore International (GLEN) also seems to like coal, with a $33 billion bid for Xstrata (XTA). Combine this with tanking solar stocks and the coal pop starts making a little bit of sense.

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The problem is that natural gas is just too easy to get now. “Supplies are still approaching a record high,” says Phil Flynn, senior market analyst at Price Futures Group. “Pipelines bringing shale gas from all over the country are adding to stockpiles.”

Those stockpiles: 3.653 trillion cubic feet heading into the high-demand winter season. The United States Energy Department has reported that gas use by power companies is increasing while coal use is decreasing. Exxon-Mobil (NYSE:XOM) wants to export liquefied natural gas to the Persian Gulf, while simultaneously teaming up with ConocoPhillips (NYSE:COP), BP (NYSE:BP), and TransCanada (NYSE:TRP) to pipe the stuff out of Alaska and ship it to Asia.

Regulation on coal mining in the United States is likely to remain stricter than gas as well, given the relative cleanliness of the fuels. State governments are also looking to begin converting auto fleets to use the fuel.

But it’s not time to throw coal under the bus, so to speak. Jeff Largey, an analyst at Macquarie, said in an interview with Bloomberg: “Coal still accounts for about 80 percent of the energy production in China and 45 percent in Japan and coal will remain the baseload for Japan even as it moves away from nuclear, so globally it’s not possible to get away from coal.” Even if the U.S. wants to move away from using coal itself, it could remain strong as an exporter.

The interplay of fuels in the energy market is wonky at best. It’s important not to look at one fuel, policy, or trend and expect that it will be dominant. Energy has, and will likely remain, a mixed basket subject to awkward regulation and sometimes fickle international and domestic demand.

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