The Relationship of Natural Gas and Coal Prices on Usa Market

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The Relationship of Natural Gas and Coal Prices on Usa Market

By | March 2012
Page 1 of 8
Contents
Introduction2
Interrelation of the natural gas and coal2
Demand and Supply2
Elasticity4
Production cost4
Consumer choice5
Conclusion5
List of References6
Bibliography6

The relationship of natural gas and coal prices on USA market

Introduction

The aim of this report is to demonstrate the correlation of prices of natural gas and coal on USA energy market. This report presents deep discussion on this topic by applying demand and supply theories, consumer choices, supply decisions, elasticity analyses and production cost overview.

Interrelation of the natural gas and coal

Coal and natural gas are two out of three (the third is oil) major forms of fossil fuels. Natural gas and coal are commonly used to fuel on power plants in order to produce electricity and other factories for heating purposes or melting different types of metal. Since natural gas burns more cleanly than other hydrocarbon fuels, such as oil and coal, and produces less carbon dioxide per unit of energy released, there is a tendency in the word to use processed natural gas to fuel vehicles. However, coal mining and transportation processes are still less expensive and much easier than gas production, since production process and delivery of natural gas to end-use consumer involves extra expenditures (i.e. pipelines, tanks, etc.). Therefore these two goods can be considered as substitute goods and can be replaced with each other, but only in long term. Transition from coal to natural gas fueling and vice-versa will take a lot of time, until special constructions are built.

According to Tom Doggett’s study by 2030 year global energy demand is expected to increase by 44 percent. Therefore, all three types of fossil fuels will be used in order to supply a growing need for cheap electricity. Besides, the Energy information Administration's (EIA) report also found that...
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