Are Falling Energy Prices Cause for Celebration? January 22, 2015 | Revell Horsey

Guest Author: Revell Horsey, Advisor at Aquicore with expertise in business strategy, financial management, operational management, and talent planning.

January in the Northeast has been damn cold! Braving sub-zero wind chill temperatures, I realized last weekend that my home oil tank was in need of a refill.

The bad news is that I couldn’t meet my goal of making it until February before making the dreaded call to the oil delivery service. The good news is that the cost to fill the tank is 63% lower than it was last January.  The cost of crude has been in a free fall since last summer and the benefits are rippling through the economy for those of us who rely on oil to heat our homes or commute to work in our cars. 

The economic stimulus of falling energy prices is definitely good news for those of us whose jobs aren’t directly linked to the energy sector. But then I feel glum when I read the headlines reporting that 2014 was the warmest year on record. And, as President Obama addressed in his State of the Union address last night, 14 of the 15 warmest years on record have occurred since 2000. Leaving politics aside, there definitely appears to be a trend that is not good news for any of us who care about the sustainability of our ecosystem, as we all should.

So, I am faced with the competing emotions of elation and concern. On one hand, I’m going to spend $1,250 less this year to heat my home. On the other, our planet seems to be getting warmer each year. When I was spending $4 per gallon of oil, I had a financial motivation to upgrade my furnace and invest in some energy saving insulation for the attic, but now that oil is relatively cheap the financial imperative isn’t as compelling.

Perhaps not compelling in the short term, but history teaches us that energy prices are cyclical.  It wasn’t that long ago, in fact, that oil was cheaper than it is today. When it was $50 per barrel in 2008, few predicted that it would be $117 per barrel in 2013. Lower energy prices are a recurring market-driven phenomenon.  However, a warming planet and the need to reduce our carbon emissions is a secular trend that isn’t going to be here today and gone tomorrow. Everything that we can and should do to reduce our carbon footprint when oil is $125 per barrel is as necessary and compelling a need when oil is $45 per barrel.

 

 

 

 

The cost savings may not drive the business case at $45 per barrel, but the energy savings are as essential today as they are when energy prices triple.

 

In fact, the business case to invest in energy savings today has the dual benefit of addressing the immediate need to reduce our carbon footprint and the longer term dividend that will result in cost savings when energy prices rebound, as they surely will.

This business case is as valid for the home as it is for the office.  Consider that 40% of the energy consumed in the US is in commercial buildings and that according to DOE estimates there is an annual savings opportunity of $30 billion per year if the commercial sector deploys proven solutions to drive energy efficiency.

The business case is all the more compelling in light of the fact that the investment cost to realize this $30 billion in annual savings has gone down dramatically due to technological and data-driven innovations in building monitoring and operations. Cost savings and energy savings are not mutually exclusive; just because we’re not as concerned with cost savings in today’s lower energy price environment does not mean we should take our eye off the ball of energy savings.

Energy Efficiency

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