Higher Energy Prices in 2008 were a Warning

A year ago now gas and heating oil prices were over $4.00, and the implications were a real concern. In May 2008 I had someone who worked for a local fuel company tell me, “I don’t know what the North Country does with $4.50 a gallon heating oil.” By the end of July 2008, it was estimated that heating oil customers in St. Lawrence County were likely to spend $31,000,000 more to heat their homes than in 2007, based on higher prices. Not only was this unaffordable for many people, it would have meant that millions of dollars would not be spent on food, clothing and other goods and services in the community, depressing the local economy, and further spreading the hardship.

The Energy Alliance, a group of local government leaders, social service people and concerned citizens, was focusing on the gathering storm. Meeting regularly in those months, the Alliance wrestled with the potential challenges of unaffordable heating fuel prices. How would people deal with high prices? Would there be people freezing in their beds? Would people start doubling up, leaving empty homes? Where could shelters be located? Was it better to try to keep people in their homes or move them out? If they moved out, what would need to happen to prevent frozen pipes and other damage due to the cold? The questions, concerns and meetings went on and on. It was shaping as an ongoing emergency, a rolling, and slow motion version of the 1998 ice storm.

As we know, prices dropped during the autumn of 2008, and, while fluctuating somewhat since then, are now a couple dollars lower than a year ago. Last October I had a chance to work with an energy expert who told me, “It used to be that prices would go up and the conventional wisdom was that they would come down again. Now that prices are lower, the assumption is that this is temporary and will go up again.”

Energy supplies are also a real concern. Back in February of this year Merrill Lynch predicted that oil supplies could drop by 30 million barrels a day worldwide by 2015 from current levels of 85 million barrels per day. Cantrell oil field in Mexico, along with production in the North Sea and Norway are in decline. There are also above ground issues, such as a lack of refining capacity and aging and declining numbers of oil drilling rigs. It has been estimated that billions of dollars in drilling projects have been scrapped over the past year due to the ongoing financial crisis. Finally, much of today’s oil is being produced in countries not friendly to the U.S.

Over the past several months, a certain level of complacency has set in again. The current lull in energy prices is an opportunity to take energy conservation measures and start to use alternative energy sources so that when high prices or scarce supplies return we are better prepared. In the absence of planning by local or county governments for the next energy crisis, individual action is always an option. Those folks who make some preparations now will find that the gathering storm swirls a little less closely around them.