Why investors shy away from coal

Why do investors shy away from coal? This may sound like a strange question given the change in ownership of many major coal companies in recent years, but the ongoing consolidation within the coal industry is quite different from any actual new investment in the industry. To begin to understand why, one must return to the early '70s, a time of low-cost, abundant energy. The price of oil was about $2-4/bbl until 1973. The price of natural gas was about 60 cents/M ft3, and coal was approximately $7/st. This, however, was before the first Organization of the Petroleum Exporting Countries (OPEC) shock. The price of coal declined throughout the 1980s, and continues its downward path in some markets. Many coal investments have not achieved their expected return, such as the case of a 1M st/yr mine in West Virginia, which was developed in the early '80s only to be put immediately on a care-and-maintenance basis, where it languished until it was sold in 1990. Other mines, such as the large open-pit mines in the Powder River Basin in Wyoming, never reached their targeted production rates. Some of these large mines had equipment that remained in crates for years, only later to be sold at a loss. The extent of losses on investments in coal mines is discussed