Surging Gas Prices and AI Demand Slow U.S. Coal Decline

Natural gas prices in the United States reached a three-year high in early December, rising from $4.23 per million British thermal units (MMBtu) in November to over $5 per MMBtu. This surge, caused by a polar vortex and record liquefied natural gas exports, has made coal a more cost-effective fuel for electric utilities. The Energy Information Administration forecasts that the annual average price of natural gas for power plants will increase by 37% in 2025.

Chris Wright, the U.S. Secretary of Energy, has advocated for preventing the retirement of firm power capacity to avoid blackouts. This policy shift aligns with data from Wood Mackenzie, which revised its forecast for the decline of U.S. coal-fired power generation from 60% down to 39%. Analysts attribute this change to soaring electricity demand from artificial intelligence, which requires consistent power to ensure grid stability.

As a result, coal production has increased due to higher demand and the delayed retirement of existing plants. The U.S. government continues to support this increase in coal production while simultaneously accelerating LNG exports.