Are fossil fuels dead?

“Fossil fuels are dead … It’s not going to be in two or three years, but it’s going away, in my view.” You would expect that these remarks might be attributed to green interests opposed to any kind of fossil fuels, particularly coal. But the dilemma is that this statement is from E. Hunter Harrison, the chief executive officer of CSX Transportation, a major railroad player and coal hauler.

CEOs are tasked with buoying stock prices for the good of shareholders and also themselves. Consequently, it is rare when a CEO takes issue with one of its major corporate markets from a revenue and profit perspective. But that is precisely what Harrison did going so far as to state that he did not plan to buy locomotives (CSX has a big surplus now) or add track capacity to accommodate coal.

Harrison has a maverick corporate style that is known for demonstrated numerical results at other major railroads that have sizable coal traffic. Thus it is hard for executives of other major coal-sourced railroads to publicly dismiss or downplay his remarks. The reasons for the decline of coal are known and documented — primarily because alternative fuels have been displacing coal for electricity generation.

Consequently, the Trump administration’s promise to bring back coal, deal with environmental restrictions etc., are viewed as something that will do little in the long term to reverse the sustained decline of coal that has already occurred. It appears that the best scenario for the coal industry would be to halt further market share losses to alternative fuels while maintaining a strong export market.

To some degree the very best scenario appears to currently be in place — increased railroad coal traffic associated with the rebuilding of domestic utility stockpiles and rising exports. However, stopping any further decline of coal for electricity generation is optimistic. Moreover, export coal markets are subject to the fortunes of foreign buyers. Currently, Europe and China are major buyers of U.S. coal, but it’s hard to predict how long this increase will last?

Think of barges as strings of railroad cars without tracks (one barge equals about 15 loaded rail cars). The decline of coal that has already occurred will not likely be reversed. In fact, it may continue and have lasting effects on the trackless barges.

About the author

Kevin Horn

Kevin Horn is a senior manager with GEC Inc., Delaplane, Va.

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