Market Overview

Somehow Coal Is The Best Energy Investment Of 2016

Somehow Coal Is The Best Energy Investment Of 2016

In the past several years, coal’s reputation as an energy source has taken quite a hit. Coal is the dirtiest of all the fossil fuels, and is now facing tremendous political and social pressure.

However, despite the overwhelming negative sentiment towards coal, it has been the best energy investment of 2016. It’s not even close.

So far this year, the United States Oil Fund LP (ETF) (NYSE: USO) is up just 1.3 percent. The United States Natural Gas Fund, LP (NYSE: UNG) is down 4.1 percent.

If you think the energy investments are flowing out of fossil fuels and into alternative energy stocks, you’d be wrong.The PowerShares WilderHill Clean Energy (ETF) (NYSE: PBW) is down 18.6 percent in 2016, making clean energy the worst investment in the energy space this year.

At the same time that the rest of the space has been struggling, the Market Vectors-Coal ETF (NYSE: KOL) is up a whopping 90.8 percent this year.

Related Link: OPEC Deal Indicates Saudi Arabia Is Abandoning Market Share Strategy

What’s going on? Ironically, regulation has been one of the major drivers.

In April, China cut back the number of days coal miners can operate. In September, China also imposed a new set of rules on land transport, which drove freight costs up. China is by far the largest global coal producer, and its actions to cut back its overcapacity have driven coal prices to multi-year highs around the world.

Last year, the U.S. Energy Information Administration reported that coal generated 39 percent of U.S. electricity. That number will likely continue to decline on an annual basis, especially considering the current social climate. However, U.S. coal demand isn’t going away anytime soon.

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