Energy prices pull in all directions

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By John Bartlit

Ideas about energy prices differ as widely as religious camps. Effects of energy prices are as far-spreading as wild mushrooms. Their nature is as fickle.

Real effects of energy prices are so disparate that anyone can easily produce a “proof” for their side of “economic reality.”

Handpicked proofs clutter the news.

National proposals are now afoot that would raise the price of energy from fossil fuels, by far our most-used source.

What would be the end result? As practice, I lay out a cross section of facts to stir thinking.

Principles begin simply. When people use less energy, the price goes down.

As the weather warms each spring, we all use less natural gas to heat our homes and the price of gas falls.

Today’s worldwide economic downturn shows the same action. Less manufacturing and shipping of products cut oil consumption, which lowered the world price.

The action brews its own reaction. A lower fuel price boosts the chance that producers and shippers in other sectors can turn a profit and hire workers. Energy prices are busy pulling in all directions.

One part of the energy system is tangled with other economics. It moves in a direction opposite to market trends. This is the delivery system and its parts – the oil tankers, pipelines and power lines.

Delivery systems have to be purchased and built to meet the largest need foreseen. So when the need for energy goes down, the delivery cost of what flows goes up. An idle tanker brings in no money; yet terms of its purchase still must be met.

Now turn to forces that are not so simple. What do energy and its price do for our whole economy and standard of living?

A trend seen in developed countries is the energy use per capita rises with industry’s growth and a mechanized system of food supply. Generally speaking, it makes sense. Energy use lets people do more than we can with only muscle power.

Initially, energy doing work for us seems to eliminate jobs. History is a long story of machines replacing humans.

But events always seem to find added things that need doing. Machines free up workers to do the new things. History is not the future, but it gives clues.

Recall the recent history. When gasoline topped $4 a gallon, commuters drove less and took to mass transit. Even patterns of car sales changed ... until gas dropped back to $2 a gallon.

Said differently, when the price of energy is high, more efficient use pays off. High energy prices signal families to make energy-saving shifts.

The signal also goes to marketers and engineers everywhere. Part of their work is to read price signals and design worthy responses. High energy prices open doors for energy-effective enterprise.

As energy costs more, people invent, produce, market and buy more efficiency, from varied sources. Energy efficiency cannot change the role of energy, but it changes the balance of responses.

History churns on. Earlier, machines displaced muscles for doing many tasks. Now energy efficiency displaces energy for doing many tasks. The balance hinges on the price.

How all the pieces will work out in time is a matter of serial guessing. Yet one patch of consensus stands out. Across the spectrum, interests agree the hard part of changing course is change itself.

The pace of The compass that guides change is energy price. The biggest hazard to any energy system is a varying compass. It results in shrewd business moves of all kinds being constantly delayed and undone by energy prices rising and falling.

A steady energy price, even at the high end, is better than uncertainty. Foreign oil sheiks know our Achilles’ heel is a low price that swiftly gets higher, then down, and so forth.

All the pieces figure in the energy puzzle, not just the slogans devised to fill the news.

John Bartlit is with New Mexico Citizens for Clean Air & Water