Chitchat Trump has to choose between Virginia's Coal Miners or Oil tycoons

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An honorable member of the Coffee Shop Has Just Posted the Following:

Trump promise of return to the past is a threat to the future

Coal is a dying industry and Donald Trump’s promise to put miners back to work is incredible. He might as well promise to restore the horse as America’s primary mode of transport and create thousands of jobs for blacksmiths.

For more than two decades since the 1980s coal was the fuel of choice in power stations, accounting for more than 50 per cent of generating fuel until 2005. Over the last decade, it has suffered a dramatic collapse and the U.S. Energy Information Administration (EIA) is forecasting that this year, natural gas will for the first time exceed coal-fired generation, accounting for a third of the power-generation market.

“Market” is the operative word, because contrary to what the president-elect told voters in West Virginia, the demise of coal was not engineered by the incumbent in the White House or by subsidies for windmills. Instead, it was a function of market forces: the price of natural gas tumbled, the cost for electricity generators of burning natural gas has fallen from $9 (U.S.) per million BTU in 2008 to between $2 and $3 per million BTU today. According to the EIA, the cost of coal has remained stable or risen slightly over the same period to just over $2 per million BTU.

Given the choice between using a clean-burning fuel or burning coal at roughly the same price, most electricity generators would prefer the former. You don’t have to be concerned about climate change (the president-elect says global warming is a Chinese conspiracy); the health impact of coal particulates and NOX emissions is enough reason for power companies to fear future lawsuits from consumers claiming compensation for respiratory disease. Utilities are voting against coal in droves, shutting down or selling coal generators, regardless of environmental regulation.

There is little that Mr. Trump can do to rescue the jobs of Appalachian miners; those in the Western states where highly mechanized open-cast mining prevails may have longer careers, exporting cheap coal to Asia. Were he to mandate coal use in U.S. power generation, he would provoke the anger of the domestic oil and gas industry, a much more powerful energy lobby than coal.

A Trump coal boom would depress further the price of natural gas and worsen North America’s energy glut. It would undermine his wider strategy to make America big in energy and render useless his promise to open up more land for drilling. The shale revolution was made with $100-plus oil prices and $8-plus natural gas prices – no one drills for peanuts.

Of course, the incoming president may quietly forget his promises to the West Virginia miners, just as he appears to have reduced the height of the wall against Mexico. Still, traditional Republicans and other economic liberals should consider from what mindset these ideas originate, and get worried.

Donald Trump is above all a property developer – that is his profession and it was the business he learned at his father’s knee. It is true that land and buildings are, like gas and oil, bought and sold in a marketplace but real estate is a very peculiar business because it is utterly local. You can’t move real estate; supply and demand are a function of purely local conditions and prices can move in opposite directions, not just in the same country but in the same town. The market is not New York but Manhattan, the Upper East Side, or just Wall Street.

It explains why Mr. Trump sees the U.S. economy as a self-contained unit, defensible in its own right. He sees no contradiction in deregulating one trade while imposing barriers against another. While Mr Trump paints a glorious picture of America’s energy supremacy, he calls for a ban on imports of Saudi crude. He does not recognize that America is profiting hugely from a globalized oil product market, blending domestic and imported crude and exporting diesel, even to the Middle East. What happens outside of America is, to Mr. Trump, irrelevant. It’s easy to dismiss Mr. Trump’s promises to put West Virginia miners back to work or to force Apple to make its iPhones in Ohio as tub-thumping. He may do neither thing but the risk is that he will meddle more in markets than even Bernie Sanders would have dared to dream. In the world of the real estate developer, regulation is a blessing.

Planning controls, zoning, development restrictions. Anything that controls market access and limits capacity is meat and drink to the real estate developer. In the wider economy, however, interventionist regulation is at best a benign nuisance but its overall effect can be to curb investment and stifle innovation. It tends to limit access, keep prices high and product scarce.

Mr. Trump is doing a terrible disservice to coal miners. By promising them a carved-up world in which West Virginia returns to some imagined past, a world stuck like a fly trapped in amber, he is not only misleading vulnerable people but threatening the innovation and development that might make their lives better.

Carl Mortished is a Canadian financial journalist based in London


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