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Wednesday, May 13, 2009

EnergyFacts: Oil Price Drop, Energy Efficiency Report

This article points to two issues of concern: oil prices may drop, soon and suddenly. A sudden drop could wipe out investments in energy efficiency by institutions (schools, prisons, and hospitals) and businesses of all sizes.

This happened once before, during the years following the oil price shocks of the late 1970s. Government programs and tax incentives for efficiency investments were abandoned. Admittedly, the federal government made some big mistakes. However, many individuals and businesses woke up to the fact that if they spent a little more now on investing in energy efficient technologies, their overall utility bills would be lower, over time, than they would have otherwise been.

What is more, these individuals and businesses discovered that they could continue living comfortably or producing as much as they did before they made these investments.

In other words, people and businesses experienced productivity gains.

Yet I am amazed at how many commentators oppose efficiency investments! Review any blogs or news websites and you will find hundreds of people characterizing such investments as a bizarre plot to end the American way.

My research suggests that energy prices will rise -- especially electricity prices. They will rise for this reason: Utilities must invest in their infrastructure -- they must build and upgrade substations, power lines, and so on -- to make money. They don't make money on the electricity they sell. They make their money off of the capital investments that they make.

However, the capital markets which used to fund these investments have dried up. That means utilities will be funding projects out of revenues -- and they will have to increase revenues to continue to pay expenses and attract shareholders/investors.

Your rates will increase. Do something positive now, for yourself and your wallet: Cut the amount of energy you are using through energy efficiency ... and if you can, through alternative power sources such as rooftop solar.

True energy independence takes place at an individual level.

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