energygate : Commentary, 7/11/2001 ]

Commentary - developments that signal a potential trend By Paulette Whitcomb, Editor-in-Chief

The future of the U.S. energy industry is at the mercy of the energy literacy of the U.S. public. And that's a frightening state of affairs, because by any grading standard, that literacy level deserves at best a D average.

So what's new? Haven't we all agreed for years how tragic it is an uninformed public makes uninformed decisions? Yep. And you know what else we've agreed on, consciously or not? We've agreed to give up on the public and concentrate on lobbying. But let's start targeting the public through the schools, okay? Because if we don't, we'll win the occasional lobbying battle, but we'll lose the war.

Let's start by agreeing on the basic elements of an unbiased, apolitical, industry-agnostic educational program that can be taught from kindergarten through the AARP, and that rises above each industry segment's parochial interests and above partisan politics. A sample of the key elements in such a fact-based educational message is proposed below.

· Supply and demand. Energy is a commodity, just like automobiles, lettuce and housing. The supply of any commodity is affected by several factors, such as weather, wars, tariffs, customer fads/necessities, physical location, transportation, governmental regulations. The scarcity or abundance of the energy commodity dictates its price, just as with cars, lettuce and housing. Supply and demand will balance - at a price.

· Elasticity. Supply and demand respond to price. They're elastic, stretching like a rubber band. They expand, and they contract. And energy demand is elastic, just like demand for every other product made or grown. As demand drops, prices follow. As supply drops, because the costs of delivering the product are higher than the prices fetched by the product, prices rise.

· Profit motive. Providers of the energy commodity, just like vehicle manufacturers, farmers and housing constructors, are in business to make a living. They are not in business to lose money. Profit is not a dirty word for any business; loss is, because if a business loses money long enough, that business goes broke, employees get laid off, people don't have money to spend, and the country sinks into a recession or worse.

· Choices and tradeoffs. Every customer is free to make these with every commodity. Customers are free to make decisions, and tradeoffs are inherent in every decision. If vehicle prices get too high for customers to afford, they don't buy new vehicles; if lettuce is too expensive, salad-makers use cheaper produce; if housing prices climb, people continue to live in their present housing; if gasoline prices jump, drivers cut down their driving to the absolutely necessary. No customer is entitled to low prices just because the commodity is crucial. There is no Constitutional right that overrides the Law of Supply and Demand.

· Risk. This is at the bottom of all choices and tradeoffs: What's at risk, who's going to bear it who's going to pay for it, in the short or long term. There are risks in energy use, no matter which source of energy: the risk of loss of investment; risk of diminishing resources; of restricted extraction and processing; of restricted transportation of energy products, by land or water; of health, environmental and personal-preference issues; of restricted siting of power plants, server farms, refineries, wind farms, nuclear plants and dams. Customers need to learn to recognize all the risks, examine and balance them.

· Energy resources. Coal, crude oil and natural gas - the extractive resources - are not easy pickings. They take a great deal of effort to find and/or extract, and then to process so that customers can use them effectively for their needs. This effort takes huge, at-risk investment capital. Also, various federal, state and local laws restrict these energy activities, limiting their areas and methods of operation. All of this increases the cost of finding, extracting and delivering energy resources, and adds up to supply levels much lower than current demand - let alone projected demand.

Nuclear power has become highly restricted in the U.S. because authorities at various levels cannot agree about where to bury the spent materials (nuclear waste). Also, this energy resource carries the stigma of disasters and accidents.

Solar power, windpower and hydropower are not finite resources, but they are localized resources. Many parts of the country do not enjoy year-round sunshine or abundant water, and the winds do not blow steadily or strongly enough. While these three energy sources provide desirable ways to meet demand, they cannot be expected to meet more than a portion of it.

Alternative energy sources have not yet arrived at the technological breakthrough that would allow for inexpensive general use by business and residential customers. Estimates place this breakthrough at anywhere from 8 to 25 years.

Conservation. This is not to be confused with deprivation, with anti-business and/or anti-energy movements, or with the extreme actions of some organizations. Conservation means recognition of the scarcity of energy resources and a decision to achieve greater efficiency and effectiveness in resource use. Conservation can be practiced by individuals or government at all levels. Price-induced conservation works voluntarily, it works in the short run, and assuredly in the longer run. Two additional points: Efficiency tends to lower costs, which increases net demand. However, BTU consumption per capita or per dollar of GDP will be more efficient.

The above message represents a radical turnaround in the public's perspective, and such educational reforms do not happen overnight and cheaply. It takes money to educate the public so that it views energy not as a God-given right handed down in the Constitution.

The energy industry needs to continue funding and participating in the professional societies and trade associations that work to educate our politicians. It also needs to make ongoing core investments toward educating our fellow citizens. They're beginning to signal they want sound, unbiased information. In light of today's robust cash flows, how about meeting this burgeoning demand by funding an ongoing program?

And with the thought that the messenger will be just as important as the message, the Energy Literacy Project (www.energy-literacy.org) is negotiating with such organizations as the National Geographic Society to undertake joint programs. Such an alliance with an organization that enjoys national recognition and credibility for the promotion of sound, balanced science would do much to allay the energy industry's image baggage, and open doors that would otherwise remain shut.

A sustainable energy policy can only come from an educated public. Absent that, any energy policy will be amended into platitude. Our representatives at any level of government always check to see what flies on Main Street so they can get re-elected. Let us educate Main Street so that everyday citizens want to take responsibility for drawing up a sustainable energy policy, and then demand its enactment from their representatives.

Note: The ELP - www.energy-literacy.org - is a nonprofit corporation attempting to achieve a cultural change in the way society views energy. Its role is as a facilitator, coordinator and consolidator of current and developing educational and informational material.

http://denver.petroleumplace.com/egatecom/editorial/

-- Martin Thompson (mthom1927@aol.com), July 14, 2001

Answers

One key factor not mentioned above is simply: THE FOSSIL ENERGY SOURCES ARE FINITE! No matter how much you spend eventually there isn't anything left worth recovering. Supply/Demand is like the float in your carburetor. As supply declines the float opens up to get more. Consider the "opening" of the float to be an "increase in price" as the supply drops. The system works fairly well except that it knows nothing about how much is left in the tank. Once it's empty it doesn't matter how far the valve opens or the price rises nothing more comes out! In fact once the rate cannot equal the demand the engine/economy quits. Ciao Kevin

-- Kevin Jepson (kevijeps@telusplanet.net), July 16, 2001.