Oil and gas fluctuations, soaring electricity prices, "they have no other choice"

The conflict between the U.S. and Iran is causing volatility in the oil and gas markets, and concerns about prolonged supply disruptions are intensifying, as Europe and Asia are once again putting coal back at the forefront.

Globally, the coal market is seeing a periodic rebound. The conflict between the U.S. and Iran is causing volatility in the oil and gas markets, and concerns about prolonged supply disruptions are intensifying, as Europe and Asia are once again putting coal back at the forefront. The market believes that high-priced natural gas is accelerating the shift from gas to coal. At the same time, U.S. government support policies for fossil fuels, together with a surge in domestic electricity prices, have caused coal-fired power to “come to the front” again in the U.S. For now, it appears that coal’s long-term path to exiting the market is becoming even longer.

The “coal as supply backstop” role is rebounding

Fatih Birol, executive director of the International Energy Agency, said: “High energy prices will force countries and companies to seek other options. Whether it’s coal use for power generation or for industrial purposes—if consumption rises in the short term, nobody would be surprised.”

Coal prices have already responded to geopolitical tensions, with clear fluctuations across major global regional markets. In the last week of March, volatility in Europe’s thermal coal market intensified, but prices still remained at a high level. The benchmark coal price index for West Europe’s ARA ports rose from $105 per ton to $125–130 per ton.

In March, Asian liquefied natural gas prices surged to the highest level since 2023, at one point reaching $25.40 per million British thermal units. Against this backdrop, Asia has become the fastest-growing region in terms of coal consumption. By the end of March, benchmark Australian Newcastle coal futures prices this year at Asian power plants had risen by about one-third. Data compiled by Bloomberg shows that on March 10, the Australian Newcastle coal price reached $150 per ton—the highest level since last November—and in early March it even briefly touched the highest point since 2024.

“Clearly, we are facing another round of large-scale energy supply shocks, which may cause some Asian economies to change their long-term strategies—namely, to rely on coal for longer periods and on a larger scale,” said Samantha Dart, co-head of Global Commodities Research at Goldman Sachs.

Against the backdrop of an energy supply crisis, coal’s role as baseload power and as a supply backstop has become even more prominent, serving as the default fallback when renewable energy or natural gas supply is insufficient. Michel Mannuk, chief executive officer of the Global Sustainable Coal Alliance, believes that without coal, the current supply shortages would be even worse, and that future coal use should have strategic significance. “Diversification is the best path.”

Putra Adiguna, head of the Institute for Energy Transition Research, said: “Increasing coal use again is undoubtedly a signal—that shifting to natural gas isn’t as easy as it sounds.”

Multiple Asian countries loosen coal-use restrictions

Tony Knoxson, global thermal coal market director at Wood Mackenzie Consulting, pointed out that economies with insufficient natural gas supply will be forced to switch to coal because “they have no choice.”

Japan and South Korea are major importers of liquefied natural gas, and they also have many coal-fired power plants. South Korea recently scrapped the cap on coal-fired power generation, allowing increased coal use when air pollution levels are low and liquefied natural gas supply is in short supply. Nikkei reported that Japan has also recently removed limits on coal-fired power generation, seeking to ensure stable electricity supply by increasing the share of coal-fired power. On March 27, Japan’s Ministry of Economy, Trade and Industry proposed increasing coal-fired power generation in the next fiscal year starting in April, including allowing less efficient coal-fired power plants to participate in capacity market auctions in the new fiscal year.

On April 1, the Philippines began increasing generation at coal-fired power plants to reduce electricity costs, while keeping the option to increase coal procurement from Indonesia. Bangladesh is seeking a $2 billion loan to ensure it imports enough fuel to get through the summer, with the country’s coal-fired power plants currently operating at full capacity.

It is worth noting that Indonesia, the world’s largest coal exporter, is prioritizing securing domestic use rather than exports, which may tighten regional supply and further push up coal prices.

Agus, an international energy and commodity price assessment organization, said that after experiencing weather-related electricity shortages, Vietnam increased coal imports. However, because supplies from Indonesia have become uncertain, Vietnam is considering importing coal from the U.S. and Laos.

As a major global coal consumer and producer, India is also increasing coal use, and as of the end of March it has enough coal inventory to last for about 3 months. India requires coal-fired power plants to postpone voluntary shutdowns for maintenance, and several Indian cement plants are stockpiling coal for the next 2–3 months. The Indian government said it expects that this summer it will rely more on coal to meet electricity demand. Ananji Prasad, technical director of West Coalfield for a subsidiary of India’s Coal India, said that geopolitical conflicts once again highlight the importance of coal.

Coal power generation and usage in Europe and the U.S. will increase

In Europe, if natural gas prices remain high, coal usage in the Netherlands, Poland, and the Czech Republic may continue to rise. Germany is considering restarting idled coal-fired power plants in order to stabilize electricity prices.

The London Stock Exchange Group estimates that if Europe’s natural gas benchmark price stays around €50 per megawatt-hour, coal-fired power generation across European countries this summer could be about 20% higher than in the same period last year.

In the U.S., coal is also regaining favor. Since Trump returned to the White House, he has strongly promoted coal, issued measures requiring the “activation of coal mine production,” declared an “energy emergency” to delay the shutdown of coal-fired power plants, and loosened related regulatory oversight.

In February, the U.S. announced that it would use government funds and Pentagon contracts to keep domestic coal-fired power plants operating. At the same time, the U.S. Department of Energy will provide $175 million in upgrade funding to 6 coal-fired power plants in five states—Kentucky, North Carolina, Ohio, Virginia, and West Virginia—to extend the plants’ operating life and improve efficiency.

It is worth noting that in 2025, U.S. coal-fired power generation increased by 12% year over year. This is the first time in nearly 10 years that there has been a notable rebound. It directly offsets the electricity supply shortfall caused by higher natural gas prices, making coal the second-largest source of electricity after natural gas. Data from the U.S. Energy Information Administration shows that in 2025, coal consumption in the U.S. power sector increased by 11% year over year, accounting for more than 90% of total coal consumption nationwide.

Meanwhile, in total, the U.S. retired 4.6 gigawatts of coal-fired generation capacity in 2025, the lowest level since 2008. Concerns about lagging grid infrastructure and electricity shortages have given “a chance to survive” to coal-fired power plants that offer better value for money. At present, electricity prices across the U.S. are rising. CBS News reported that in 2025, U.S. regulators approved 43 electricity price increases totaling $11.6 billion, affecting about 56 million people. The U.S. Energy Information Administration forecasts that in 2026, electricity prices for U.S. residents will rise by nearly 4%. The latest Harris poll shows that 57% of Americans support extending the operating time of coal-fired power plants to meet growing energy demand and maintain lower energy usage costs.

Headline: The global coal exit pace is slowing overall

By | Wang Lin, a reporter

Produced by | China Energy News (cnenergy)

Edited by | Zhao Fangting