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Coal Rebounds as the Flexible Fuel for the Long-Term Investor

Stocks in this article: BTUKOLUSOUNGBP

NEW YORK (TheStreet) -- I've written before on the reasons to be bullish on coal as Peabody Energy (BTU), the sector blue-chip, and Market Vectors Coal (KOL), the exchanged-traded fund, are both up for the last week and month of market action.

Market Vectors Coal has also risen for the last quarter, six months and year of trading. It also outperformed United States Oil (USO), the exchange traded fund for oil, and United States Natural Gas (UNG), the exchange traded fund for natural gas, over the last month, quarter, and six months. 

There are many reasons to expect Peabody Energy, Market Vectors Coal, and other securities from the coal group to reward long term investors.

The first is the easiest to comprehend and the most important: demand. Over the last decade, coal use has added more to the global energy supply than any other source. Coal provides electricity for more than 40% of the world and that too is increasing. The amount of power that comes from coal in the U.S. is now at 42%, nearly a one-fifth jump from 2012 when it was at 36%.

READ MORE: Peabody Energy Becomes #124 Most Shorted S&P 500 Component, Replacing Denbury Resources

Next is that coal is the easiest fuel source to access. Coal can be dug up and carried home to provide heat and power: try doing that with oil, natural gas, or any form of alternative energy. In a recent article in Real Money, Glenn Williams laid out why, "…liquefied natural gas is a nation’s last fuel of choice." Natural gas and oil require extensive, expensive pipeline networks. Ease of use is why the demand for coal has increased globally and will continue to do so in the future.

For all of its problems, coal has many other advantages over oil, natural gas, and alternative energy, too.  It is not only the easiest to access, it is also the easiest form of fuel to store. That is the great weakness of alternative energy. Shipping coal is much safer, too: if a train carrying coal tips over it causes a mess, not an explosion like that for oil. It can be transported in a wide variety of modes. It is also a much more flexible fuel. That is why usage of coal grew by 3% last year, more than any other form of energy according to the Statistical Review of World Energy from BP (BP), the British oil giant.

READ MORE: Bullish Two Hundred Day Moving Average Cross - KOL

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