The Kiplenger Letter

FORECAST FOR MANAGEMENT DECISION MAKING Vol.81, No. 47

Washington, Nov. 19, 2004

Dear Client:
If you want lower energy bills...  Conservation is your only real option.

High prices will be around for a while. Oil's recent downtrend won't continue.  It's the result partly of a modest improvement in inventory levels before winter sets in, and partly of some traders taking profits on a rally that put prices over $55 a barrel.
 
The core factors haven't changed much:  Demand is strong, fueled by fast growth
in China, India and other developing countries.
But supplies are still constrained.  Output in Saudi Arabia has maxed out. Big gains
in Russia and elsewhere won’t come soon.
 
And the risk of disruption is high, in Nigeria, Venezuela, Russia and the Mideast. That’s adding about $10 to a barrel of oil. 
 As a result, oil will average about $40 a barrel through 2005, only a tad less than this year. In fact, a return to the mid-$20s... the norm for the mid-1980s to mid-2003...will remain a pipe dream.
 For most fuels, refinery bottlenecks spell record-high prices (before accounting for inflation) in the months ahead: Heating oil, at an average of $1.95/gal. this winter, up 35% from last year. Gasoline
and diesel, climbing to $2.25 and $2.50, respectively, by Memorial Day.
 As for natural gas...new nominal records each winter for years.  This winter, figure on a national average price of $7 per million Btu. 
Fortunately, there's still lots most firms can do to trim use. And, because fuel prices will stay high, even costly moves can pay off.  Existing technologies can improve energy efficiency by about 20%.
Among the most effective and economical options: Motion sensors.
At about $25 each, they turn off lights, copiers, etc., in empty rooms.
 High-efficiency fluorescent fixtures can trim lighting bills 50%.
 Nighttime water chillers reduce air-cooling expenses up to 30%. Upgrading air-conditioning systems cuts $1/year per square foot of space.
 Low-friction, adjustable-speed motors use 10% to 20% less power.
 And turning to "green" building designs for new construction. Energy-efficient buildings are tremendous cost savers from day one.
 
 Not sure where to begin? Get an energy audit for expert advice... free from the Energy Dept. for manufacturers with annual energy bills under $2 million. Others should contact their local utility companies.
 

If your firm uses trucks, try SmartWay Transport Partnership at the EPA for solid info on fuel-efficient technologies and practices.

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