Since 1976, coal has been the least expensive fossil fuel used to generate electricity. During the early 1970s, natural gas was the least expensive fuel used to generate electricity. In 1973 electric utilities paid on the average, about 34 cents per million Btu of natural gas, 41 cents per million Btu of coal, and 80 cents per million Btu of petroleum.¹

However, by 2006, on a dollars-per-million-Btu basis, natural gas was the most expensive fossil fuel ($6.94), petroleum was second ($6.23), and coal was least expensive ($1.69). Although the cost of generating electricity from coal has increased, it is still lower than the cost of generating electricity from either natural gas or petroleum.

For 2006, coal prices rose across every consuming sector.  In particular, the delivered price of coal at electric utilities (a subset of the electric power sector) increased for a sixth consecutive year, to $34.26 per short ton (1.53 dollars per million Btu), up 9.7 percent from the prior year.

Another important use of coal is to produce coke, which is used in smelting iron ore to make steel. In 2006, the largest increase in consumer prices was in the coking coal sector. The tight specifications needed for coal to produce coke limit the availability of the coal. Thus, as the  world market for metallurgical coal tightened over the course of the year, the delivered coal price at U.S. coke plants climbed 10.8 percent, reaching $92.87 per short ton in 2006.

The mine price of coal increased 6.7 percent over 2005. The average open market mine price, which excludes any transportation and insurance costs, increased in 2006 to $25.16 per ton. Open market coal is sold to companies other than the mining company's parent company or an operating subsidiary of the parent company.

The average U.S. coal export price for 2006 was $70.93 per short ton. Coal exports in 2006 totaled 49.6 million short tons, down 0.5 percent from a year earlier.

The average coal import price for 2006 was $49.10 per short ton, a 5.1 percent increase over 2005. Total coal imports for 2006 rose to 36.2 million short tons, a 19.0 percent increase over 2005.

What is the outlook through 2030? Average real minemouth coal prices (in 2006 dollars) fall from $1.21 per million Btu ($24.63 per short ton) in 2006 to $1.15 per million Btu ($22.63 per short ton) in 2020, as prices moderate following a substantial run-up over the past few years. After 2020, the construction of new coal-fired power plants increases total coal demand, and prices rise to $1.21 per million Btu ($23.45 per short ton) in 2030.

Footnote 1. To make meaningful comparisons of different energy sources, you must convert physical units of measure (such as weight or volume) into a common unit of measurement based on the energy content of each fuel. One practical way to compare different fuels is to convert them into British thermal units (Btu). The Btu is a precise measure of energy--the amount of energy required to raise the temperature of 1 pound of water 1 degree Fahrenheit.

More information on this subject can be found in the following EIA publications:
    Coal projections from the Annual Energy Outlook
    Coal prices from the Annual Energy Review
    Consuming sector coal prices from the Quarterly Coal Report