Oil-linked gas surge drives U.S. coal decline despite federal support
U.S. coal-generated electricity fell 10% in the first half of the year while natural gas prices dropped as production surged, largely from oil-driven output in the Permian Basin.
In the first six months of the year, coal-fired power generation in the United States declined by 10%, while natural gas stayed the primary electricity source. The Energy Information Administration lowered its forecast for the benchmark Henry Hub price to $2.87 per million BTU for the current quarter and expects gas to stay below $3 through November, revising down from earlier higher estimates. This price decline is driven by a surge in gas production: oil-focused drilling in the Permian Basin, prompted by oil prices rising amid intermittent Strait of Hormuz disruptions, has pushed associated gas output 6% above the previous year, and Louisiana’s Haynesville field contributed an additional 9% increase.
Total daily gas output is on track for a record 122.5 billion cubic feet, with storage at its highest pre-winter level since 2016. At the same time, the administration launched an unprecedented pro-coal push, opening new leasing acres, invoking the Defense Production Act, and rolling back EPA regulations, yet coal consumption is still expected to fall another 9% this year, with large stockpiles accumulating. The analysis concludes that market dynamics, especially cheap associated gas, are outpacing policy in reshaping U.S. power generation.
Why it matters
Cheaper gas, boosted by oil-linked production, is hastening coal’s exit from U.S. electricity markets despite strong government backing.
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