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Historical Correlations Of Oil To Coal Suggest We Won't Be Seeing A Return To $100 Oil Anytime Soon

Musing recently about the V shaped recovery in oil prices in 2009 and the possibility of the same thing happening now, I decided to compare historical oil prices to coal prices and the results surprised me. Going back to 2001-2010, the barrel price of oil and the ton cost of thermal coal tracked each other fairly closely. The charts below, though having slightly different start dates, do show the two commodities moving together through the 2000s. Then in early 2011 a wide divergence quickly occurred, with oil reaching $120 and coal down below $60. This divergence is unprecedented in the preceding 10 years (2001-2010) as you can see in the charts below:

Apologies that the charts aren't covering exactly the same time frame. I did analyze them and the biggest premium of oil over coal I could find before 2011 was 50% and only for a short time in 2006.… Read More …