Global liquified natural gas shortage pushes countries back to coal

An active coal mine in Indonesia. (Photo by Dominik Vanyi, Unsplash)

Countries are turning back to coal-fired power to fill the energy gap left by liquefied natural gas imports held up by Iran's choke hold on the Strait of Hormuz, The Economist reports.

With nearly a fifth of LNG supplies stuck in the Persian Gulf, countries that rely on LNG imports for electricity generation are scrambling to find a substitute. "Rich ones are forking out more for whatever LNG they can get their hands on. Some poor ones have shut schools or urged businesses to cut short their work week," The Economist reports. "Everyone is looking for alternatives. Many are eyeing coal."

Despite its declining popularity, coal-fired energy remains part of the global energy mix that some countries are putting back online to replace LNG supplies. "Japan and South Korea have lifted restrictions on older coal-fired power plants, which were being phased out," The Economist reports. "Prices for Australian coal, most of which typically ends up in Asia, have risen three times as fast as those in Europe and five times as fast as in America since the start of the war."

While the coal market is warming up, its progress could be slowed by China and Indonesia, which have active mines that can increase production to counter the LNG shortages.

If the Strait of Hormuz remains closed, the coal market is likely to see a temporary boom, since demand from major energy importers such as Japan, South Korea and Taiwan could push coal prices higher, The Economist reports.