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Rising Oil Prices Could Help Coal With AM-Iraq-Consumers, Bjt

August 8, 1990

CHARLESTON, W.Va. (AP) _ Soaring oil prices aren’t expected to create any abrupt increases in coal prices, but experts agree the coal industry could receive a much needed boost if oil prices remain high.

″I think you’re very unlikely to see any massive switching (from oil to coal),″ said John Gresser of the National Coal Association. But he said the industry is in a good position to increase production if other countries move from oil to coal.

Coal prices have remained fairly stable at $22 to $26 a ton in recent months because of intense domestic and foreign competition, experts said.

Gresser said coal doesn’t compete directly with oil, so a rise in oil prices has little effect on coal.

And he said U.S. utilities cannot quickly switch from burning oil to burning coal in power plants.

But experts said more plants in European can be converted, and there, the sale of coal may increase.

″We could see maybe a jump in (European) demand from 3 million to 6 million tons,″ Wyn Holbrock of the A.T. Massey Coal Co. in Richmond, Va., told the Charleston Daily Mail.

Japanese plants can also switch from oil to coal, analysts said.

″In Europe and the Far East, there is a distinct possibility over a longer trend of time that the price of coal as an exporter would be impacted,″ said Mark Cohen, a coal analyst for Kidder, Peabody and Co.

Wayne T. Ewing, president of Peabody Development Co. and chairman of the National Coal Association, said the demand for coal exports will be greater if the oil crisis continues, especially because prices are soon to be negotiated for next year.

″If this thing continues to escalate, it will have some effect here in the U.S.,″ Ewing said.

The experts said oil prices must continue to remain high, however, before the U.S. coal industry will see major results.

″High oil prices must stick around for a long time with implications of no improvement,″ said Rafael Villagran, an analyst with Shearson Lehman Hutton Inc.

If some utilities do switch to coal, they can be assured of a large supply, Gresser said. He said 1 billion tons of coal will be produced this year and the coal industry can easily increase production.

″After the last oil embargo, people thought there would be more of a demand for coal,″ Gresser said. ″Many people purchased coal mines and that capacity is still there to meet any sort of increased demands.″

But Villagren cautioned that an increased European demand for coal does not necessarily help U.S. coal producers.

″The U.S. has stiff competition from the Australians and the Far East,″ he said.

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