Utility companies can use a mix of plants different energy sources to produce electricity, mainly these are coal fired plants but increasingly they relying on gas turbines. Technological improvements in hydraulic fracturing, or "fracking," have decreased the cost of extracting smaller pockets of natural gas. What affect does fracking have on supply and demand for coal?

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Business

Oswaldo Cantu

24 February, 03:21

Utility companies can use a mix of plants different energy sources to produce electricity, mainly these are coal fired plants but increasingly they relying on gas turbines. Technological improvements in hydraulic fracturing, or "fracking," have decreased the cost of extracting smaller pockets of natural gas. What affect does fracking have on supply and demand for coal?

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Edwin Graves · Answer 1

Answer: The Demand for Coal reduces and Quantity Supplied for Coal reduces as well.

Explanation:

Coal is a substitute for Natural Gas in making electricity.

This means that if either of them became easier to get, the other would suffer due the the easier one being used more often.

Fracking has made acquiring Natural Gas cheaper which will mean that Utility Companies who are one of the biggest consumers of coal will want less of the coal because natural gas is now cheaper.

This will reduce the demand for Coal which will force it's Demand Curve left. The new Equilibrium will a lower price at P2 and a lower Quantity Demanded and Supplied at Q2.