The coal industry is booming.

With supplies tightening and demand rising, mining companies are commanding higher prices for the fuel and investors are rewarding them lavishly.

Massey Energy Co.’s stock price has more than doubled in the past year, while shares of Consol Energy Inc., Arch Coal Inc. and Peabody Energy Corp. have soared 50 percent or more.

The last time coal prices were at today’s levels was 2001, when stockpiles dwindled as power producers sought an alternative to expensive natural gas. But those good times proved to be short-lived as coal producers boosted spending right before the economy slowed and natural gas prices plummeted.

“In ’01 people got burned by expanding too quickly,” said James Gardiner, executive vice president and chief administrative officer at Massey Energy, of Richmond, Va.

While the industry once again might be experiencing a short-term boom, many officials and analysts believe coal producers are at the start of a period of prolonged prosperity — albeit one that won’t begin in earnest until 2005, when supply contracts signed this year begin to pay off.

“I believe we’re on the verge of a major resurgence,” Jack Gerard, president of the National Mining Assn., said last week at the West Virginia Coal Assn.’s annual meeting in Charleston, Va.

Wall Street is upbeat about several trends, the most significant of which is steadily declining productivity from aging Appalachian mines, resulting in two consecutive years of lower nationwide output despite growth in the West.

The domestic shortfall — magnified by a handful of bankruptcies by Eastern coal companies since 2001 — has been offset through imports, and no shortages are forseen. But analysts predict that over time supplies will tighten, leading to higher and more volatile prices.

A 360-foot-tall piece of mining equipment called a dragline moves topsoil and rock so coal underneath can be mined in this July 1 photo at the Black Thunder Mine near Wright, Wyo. With supplies tightening and demand rising, mining companies are commanding higher prices for coal and investors are rewarding them. The last time coal prices were at today's levels was 2001.

“In our view the long-term supply and demand outlook for the U.S. coal producers continues to improve,” Credit Suisse First Boston analyst David Gagliano said in a recent report.

In 2003, U.S. coal production declined 1.9 percent, according to Energy Department statistics. Credit Suisse First Boston estimated that demand grew about 3 percent last year.

With nuclear plants nearing output limits and natural gas prices soaring, analysts believe coal will become an even more important fuel to electric utilities. More than half the nation’s electricity already comes from coal and demand is expected to increase as the economy improves.

The outlook for coal also benefits, analysts said, from the Bush administration’s industry-friendly positions on issues ranging from power plant pollution to controversial mining techniques.

The spot price for Central Appalachian coal averaged $41.50 per short ton for the week ended Jan. 16, which was 33 percent above last year’s level, according to the Energy Department. Coal mined in Wyoming’s Powder River Basin averaged $6.75 per short ton, a 9 percent increase from a year ago.

Because most coal is purchased through long-term contracts, today’s higher spot prices have little immediate impact. But they do give producers leverage during contract negotiations.