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Coal Isn't Surrendering to Natural Gas Just Yet

By Taylor Muckerman – May 7, 2013 at 8:37AM

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The short-term outlook got brighter, but is the long-term future of coal still luminous?

Thanks to the balance between supply and demand of natural gas returning to more of an equilibrium due to myriad reasons, the price has finally made its way back above $4 per million British thermal units. Though the last week hasn't been friendly to the vaporous fossil fuel, it is still treading water above this mark. No other group is more delighted by this than the coal producers.

Demand for coal in the United States fell just as sharply as the price of natural gas in 2011, but the tide is turning, at least for now. Natural gas usage by utilities was down double digits in March from the same period in 2012, while a major domestic electricity generator doubled its coal capacity during month. For those of you who have been following this tug of war, it appears that coal is inching its way back into the picture. 

Unfortunately for these companies, there are still several headwinds that could lend a helping hand to natural gas in the coming years. Motley Fool analyst Taylor Muckerman expresses his concern for the longer time horizon but feels the rebound in coal demand in the U.S. isn't quite over just yet.

Taylor Muckerman has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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