The real reason fuel prices are high

The developing world is catching up to us. The United States has been a prodigious user of fossil fuels since the mid-1800s and the rest of the world has been playing catch up ever since. Now they really are catching up, since our appetite of energy topped out in 1981, at the height of the last oil “bubble”. A lot of misinformed people are complaining about conspiracies and blaming it everything from OPEC, to the oil companies, to Republicans or Democrats in the federal government. And that is commonly normal for periods of rapid change like we see now. It seems like there is only so much economic and social change that can take place before the conspiracy theories start coming out . But that is another story.

Rapid change is, in fact, what is happening. To illustrate: In China, air conditioning was rare as recently as 1991. At that time, only 2% of the Chinese had air conditioning. The rest (over 950 million people) had to sweat it out the same way everyone did before AC became common (1940 or thereabouts). Today, 50% of the Chinese have air conditioning. 460 million more people are now using air conditioners in China than just 16 years ago. To realize the magnitude of this change, you have to imagine adding the equivalent of 2 more North Americas to the worldwide demand for energy (and fuel). The Indians are not far behind. NY Times story by Keith Bradsher

Being what it is, demand is now way up. And the demand for air conditioning is not going away. Pundits who blame the oil companies and politicians and whatever, are not checking their facts. They fabricate a lot of ignorant lies and misinformation is being promulgated this way. Take it all with a grain of salt. Air conditioning is only part of this issue, but let’s face it, the developing world is going to catch up sooner or later, and why blame the suppliers and various politicos?

Its our fault for not being prepared. Our nation became addicted to cheap energy generations ago, and its our generations responsibility to change this.

I am not complaining because I have known this to be true personally. I got burned on oil stocks too on the way down from the peak in the mid-80s. I misread the signs, along with countless others, and didn’t realize that the imbalances would be corrected by an oil glut (1985-91, if you will recall). On the other hand, being an HVAC engineer for almost 30 years, I have just been waiting for this to happen. I can tell you about many times where I studied a clients energy usage, suggested efficiency measures, and then calcuationg ridiculously low rates of return (like 3% annually). Why bother? Things have changed indeed.

And I daresay, our federal government is being run by some people who have no clue, so don’t expect much from that end. The recent (2005 EPact law )tax incentives are still rife with risk (IRS problems) for business owners and engineers, so prudence dictates that I cant certify to the owner or the IRS that the $ savings will be what we say it is. (the savings must be some percentage as designed) As EPact 2005 is written, the only certain tax benefits are the ones relating to lighting or solar power. The HVAC and hot water incentives, as they stand, depend on too many uncontrollable variables, particularly the price of electricity. And if the IRS rules change has a bad day, you might not even get the tax credits. Furthermore, the way the law is written, if the price of electricity goes down, as the engineer of record, I could get sued for not anticipating that.

Now it’s you and me, baby, the everyman who must do our part to buy and plan and invest responsibly, despite the idiot in the white house! Replace your incandescent lights, drive a gas saving car, replace that worn out air conditioner with a heat pump, buy a set back thermostat, invest in a utility sector or alternative energy mutual funds.

(in the interest of full disclosure: I invested, putting my money where my mouth is, and I own utility mutual funds as well as stock in Suntech Power, a photovoltaic solar panel manufacturer based in China)