Coal prices have been tumbling even more than oil and gas prices. The common wisdom is that since the President-elect said during the campaign that he would destroy the coal industry, then we'd all better sell our coal stocks and buy solar and wind energy companies. I say "horsefeathers."
Let me put it this way: "When a President with a reputation for sweeping reform meets an industry with a reputation for being essential to the well-being of the country, it is the reputation of the industry that will survive." (Apologies to Warren Buffett!) If we are serious about weaning ourselves from smarmy foreign sources of energy, then we must proceed with all haste to exploit our 200 years worth of coal. It may be dirty today, but by extending existing technological research, we could have clean liquefied coal way faster than we could put a man on the moon, something we did, ah, yes, some 39 years ago… I would ask our new President a simple question: "Do you want King Coal or the Kingdom of Saud?" There is no other choice this year, this month, this day.
Solar is, thankfully, becoming cheaper and more efficient. But with the umbrella of high oil prices fast fading into distant memory, there will be less incentive, and less profit, in continuing this essential research. Ditto for nuclear. Wind power is becoming cheaper, too, but wind, hydroelectric, biomass and geothermal will never supply more than a fraction of the energy we need. Still, politicians have an affinity for hot air so expect them to continue to bloviate endlessly about wind power.
If we really want to do something about energy efficiency, we should spend our research dollars and innovation in the area of storage and transmission. The wonder of it all is that you can be served by a utility fired by natural gas that has a peak overload when you go to turn on your computer at 9 p.m. on the Pacific Coast and you'll never know it. That's because your utility is tied in to a rickety patchwork of electrical grids that allows them to buy 5 seconds or 5 hours of power from a utility across the continent where it is now midnight and everyone there has shut down for the night.
It doesn't matter if the power plants that create this electricity create it from nuclear, solar, gas, wind, geothermal, biomass or oil -- once it is converted into electricity it is readily transported at a speed and cost taking the raw material via truck or railcar cannot begin to compete with. Rather than regulate utilities county by county and state by state, we could locate wind-generated power plants where the wind is, solar plants where the sun always shines, coal plants next to the coal fields, etc.
To do this requires taking the crazy-quilt patchwork utility executives have stitched together out of necessity and creating instead a true national grid. One of those massive power lines you see as you drive about can carry about 1% of the nation's average electrical load. If we were to string them together in a truly national grid -- and add another 20,000 miles or so to reach into every nook and cranny -- we could have a remarkably efficient way to generate electricity and tell Venezuela, Iran, Nigeria and even our dear friends the Saudis, "No thanks, we don't need as much oil this year as we did last year."
Which brings us back to King Coal. Since coal is used more than any other fuel to provide electricity, and electricity is the most efficient way to move power around the country, and since the US has more coal than any other nation in the world, I say we'd be particularly stupid not to play to our strength. Hence my decision to double down on our investments in companies like Natural Resource Partners (NRP) and Penn Virginia Resources (PVR). Neither have any liability for operations since they don't operate but merely own or lease the land on which others extract the coal. They collect royalties which allow them to pay great double-digit dividends, and enjoy earnings that will increase every year that we continue to use electricity. I'm OK with that. But then, I'm a geopolitical analyst by training and experience as well as a financial analyst.
I know how I answer the question, "Do you want King Coal or the Kingdom of Saud?" King Coal, thank you.