Investors often have a hard time separating a politician’s political personality from their actual policies, yet it’s policies that matter. Similarly, investors often have a hard time separating media and political rhetoric from economic realities and the realities of the actions the consumer makes in real life. In reality, consumers vote with their dollars and make many financial decisions every day based on one simple metric: cost versus value, i.e., am I getting my monies worth?!

It may surprise you that this basic credo is alive and well in the coal market, where its global consumption and usage is at record highs. Yes, you read that right – global coal consumption is at record highs and that demand is driven by the Asia-Pacific region (chart directly below), where energy demand is immense thanks to coal burning power plants, steel and cement production, and myriad other industries.
 

Coal is still a reliable, plentiful, and low-cost energy source in Asia-Pacific countries, particularly for China’s power plants, and their fossil fuel dependent industries. Accordingly, when it comes to coal, Asia-Pacific, and particularly China (infographic directly below), are simply gravitating to an energy source where they get their monies worth both in terms of cost and synergy with their existing infrastructure. Media and political rhetoric could have you thinking that we are awash in a world of EVs, solar panels and wind turbines, and a decrease in the use and support of fossil fuels as an energy source, but the real world economics of energy consumption and use tell us otherwise.
 

So what does global coal consumption being at record highs have to do with your day to day financial life? Plenty, including the certain and regular truths listed below that we often talk about and that just don’t change:

• Spend less than you make
   
• Keep non-consumer (i.e. business) debts low
   
• Eliminate consumer debt whenever possible

And as it relates to the surprising data facts of this article:

• Bet on long-term economic growth and innovation
   
• Ignore short-term media noise that often employs scare tactics to grab your attention and  distort what is actually going on
   
• The economy is made up of people, people who are trying to improve their life and who vote with their wallets, that is the grass roots power of free markets that drives economic growth

Just like the horse was replaced by the car as a mode of transportation, coal will be replaced as an energy source when we have a cheaper and more readily usable alternative. Invest accordingly.

 

Randy, Ian and Harrison

Chart source: Energy Institute, 2024|73^rd Edition Statistical Review of World Energy

Infographic source: www.visualcapitalist.com