Most Western countries were forced to abandon their green-energy plans in the wake of the Russia-Ukraine war. Over the past decade, several developed nations had pledged to phase out the use of coal, undoubtedly the dirtiest fuel on the planet, in favor of greener alternatives. However, that all went out of the window when Russia invaded Ukraine.
Russia is a major player on the global energy scene, producing more crude oil than most countries with the exception of the United States and Saudi Arabia, and producing 700 billion cubic meters of natural gas in 2021.
The invasion, along with efforts by western nations to sanction Russia, exacerbated the ongoing energy crisis and forced countries back to dirty fuels such as coal. Like most of the economic issues currently plaguing the world, the energy crisis was caused by the coronavirus pandemic.
As the world began to open up after mandatory lockdowns, global demand for gas went up much faster than suppliers could keep up, leading to significantly higher prices. European nations such as Germany, France, Italy, Austria and the Netherlands had to fire their coal-power plants back up when Russia cut natural gas supplies to Europe in retaliation for western sanctions.
The energy shortage may have significantly increased fears of rolling blackouts in several European countries, especially with the winter approaching, and U.S. coal prices have soared. With the global energy crunch becoming more severe amid massive energy shortages, demand for coal has surged and pushed coal prices in America past $200 per ton for the first time ever.
Data from the U.S. Energy Information Administration shows that spot prices for Central Appalachia coal increased to $204.95 a ton, the highest they have been since 2005. Naturally, the increased prices resulted in a bump in the share price of major coal companies in the U.S. For example, Arch Resources shares went up by 7.4% to trade at $127.41, and Peabody Energy Corporation (NYSE: BTU) shares climbed by as much as 6.5% to $26.42
But while soaring coal prices may prove to be a boon for U.S. coal producers, households will pay the price. Since coal is one of the most-used fuels in American power plants, increasing prices will increase the pressure on American homes that are already dealing with record-high utility bills.
The National Energy Assistance Directors Association estimates that around one in six or 20 million households in America are currently behind on their electricity bills due to increased energy costs.
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