The State of Competition in the Coal Industry

A major part of United States energy policy is the maintenance of competition in the energy sector of the economy. Monopoly power is generally presumed to exist when industrial organization has a four-firm concentration ratio of 50 percent or more. Estimates of concentration ratios in American manufacturing as a whole range from 38 percent to 40 percent.

On the basis of 1976 production, the concentration ratio in the coal industry is as follows: the top 4 firms control 25 percent, the top 8 firms 34 percent, and the top 20 firms 50 percent. Concentration ratios since 1950 showed a trend towards an increase during the 1950's and 1960's but a decrease since 1970. A viable state of competition exists in the coal industry and, unless circumstances change, domination by any firm or group of firms is unlikely. Control of current production is shared by numerous firms and ownership of coal reserves is dispersed even more. On a nationwide basis, petroleum firms account for less than 20 percent of total production and even less of coal reserves. The degree of competition varies. In the Eastern market, large numbers of firms actively compete in both contract and spot sales; reserve ownership is well dispersed. In the two Western markets, however, the situation is dynamic and requires the continued vigilance by the Federal Trade Commission, the Department of Justice, and the Interior Department through its coal leasing program.