Are we being fuellish?

A NB Power meter reader leaving a truck running while reading meters inspired a citizen to contact the Moncton Times and Transcript.  A story complaining about the choice of vehicle and the apparent lack of concern for the extra cost of fuel drew mixed responses from readers.   Of course, running a business is complicated but energy should not be ignored especially when we are nearly at peak oil.

Utilities know that the day of the meter reader is nearly over.  The number of “smart” meters is increasing each year both at NB Power and Saint John Energy, or it should be.  Apparently, NB Power has 100,000 of these time and energy savers.  One definition of a “smart” meter is one that can measure various quantities like kWh’s, and transfer that information wirelessly back to the utility. There are various technologies that suppliers use but the idea is the same – accurate billing at a lower cost by using new technology with less manpower, vehicles and fuel.  NB Power’s technology requires only that an employee drive by the neighbourhood to receive the signals.

Saint John Energy has an interesting advantage due to compact geography permitting the smart meters to talk directly to the office giving kWh, indication of voltage level and indirectly, whether the power is off at a particular location.

So what is the business case payback now for a massive changeout program? Certainly it is less expensive to simply replace old meters when they are outmoded or broken.  Should we proceed at a faster pace given the cost of fuel and greenhouse gases?

Over the past year, large increases in the cost of fuel for meter reading have likely improved the economics.  Secondly, a 20% decline in the price of crude this month shows that conservation will lower prices.  In fact it doesn’t take a huge reduction in volume to greatly affect what we pay.   Could an accelerated change in meter reading system be a part of an effective conservation effort?  The cost of West Texas intermediate crude averaged $72 in 2007 and may average $119 or higher in 2008. This is a difference of $47 a barrel or a $1.47 trillion dollars increase in cost for the people of the world.  The people of Canada are paying $34 billion more this year as a direct result of inadequate conservation putting pressure on lagging production levels. (2M barrels a day x 365 days x $47)

Could NB Power by itself drive down the world price of oil?  Unlikely, although they do burn a large amount of oil and fuel.  The effort has to include each of us, including companies like NB Power, making serious efforts to choose a smaller footprint.   When I once asked a vehicle coordinator why NB Power was supplying half tons for some employees, the answer given was trucks have a better resale value.  Well, that doesn’t appear to be the case now.  Michel Losier notes that NB Power has 11 hybrid vehicles.  What percentage would that be among the hundreds of vehicles in their fleet?

There are other examples of a lack of recognition of the importance of conservation – An employee lives in one city, but travels morning and night to work in another city at company expense.

Rainy days have seen NB Power’s larger vehicles cruising around burning diesel instead of being parked.  This is a productivity issue, as well as lack of respect for the world’s non-renewable resources. NB Power indicates that they are doing their best to encourage the proper use of vehicles, fuel, and productivity.  These are serious issues no doubt, and pose a number of million dollars in savings each year.  But these are small potatoes really when you look at the cost of coal and oil rising like a meteor.

An interesting commentary came from the Energy and Utility Board on June 26 of this year.  In a report to the minister, they virtually threw up their hands stating that the information provided by NB Power did not permit them to offer a valid opinion on whether the recent 3% rate increase was justified.  What is it between NB Power and the EUB that they can’t transfer needed financial data in a simple and understandable way?  Is NB Power running a shell game or is the EUB a poor communicator of their needs?

The Minister of Energy indicated that he doesn’t have a solution yet for this company that acts as an integrated utility but is legally split into several companies.   It would be interesting to have an Energy minister who addresses this and other serious problems, but more and more, it appears we will have to wait until 2010.  The EUB might think about adding regulation at Saint John Energy, where there are some issues similar to NB Power.

* Minister Jack Keir announced on Friday that “two experts”  William Marshall and William Thompson will study the situation related to NB Power’s corporate structure and make recommendations in a month.  William Thompson was Deputy Minister of Energy overseeing the breakup of NB Power from an integrated utility.   …. It’s nice to be trusted to fix what you broke.

What’s in your future as oil prices rise?

The ancient city of Pompeii was destroyed by the volcano Vesuvius in 79AD and the majority escaped.  But 3300 people died during the 24-hour eruption, even though there was ample time to flee.  Similarly, we see people staying in the path of hurricanes and dying.  Humans often fail to appreciate a dangerous situation, make a poor decision and perish.  Explaining some of the dangers that exist in our energy supply may help people make better decisions on their future.

About two years ago, my first columns looked at peak oil and the gradual decline of oil production that would be coming soon.  A shortage would raise prices dramatically and affect our ability to buy gas for our cars, heat our homes and have a job.  It’s not exactly the same urgency of Pompeii, but quite serious.  The author Jim Kunstler calls it “the long emergency”.

I remember discussing peak oil with the management of Saint John Energy.  Their response was similar to the average man in the street – denial, belief that more oil will be found, or that human ingenuity (technical solution) would conquer the problem.

Today peak oil is sending a few tremors through the economic system and while more people are aware, the majority are not. Many people sense we’re in trouble but haven’t connected the dots. I’m going out on a limb and make a few more predictions for the coming years. There is a range of outcomes, based on our response to the problem, which goes from bad to horrible.  If you don’t want to know, please turn the page and have a good life.

1) While we may see a short-term decline in price in 2008, the overall tendency will be prices rising to unbelievable levels within several years.  The price of oil has doubled as worldwide production capacity has virtually stalled.   A decline of capacity will soon start and perhaps be at 50% of present day levels by 2030 or by 2040 if we’re lucky.  Either way, it’s bad news.  Note that an oil decline of 1% equals a 1% decline in GDP.  You lose your oil and your economy contracts.

2) The price of food will rise significantly over the world on a continual basis.  The productivity of farmers (the green revolution) was related to its major inputs, which are oil and fertilizer.  With a decline in oil and fertilizer, we can expect food shortages and significant starvation related deaths in the next twenty years – Not necessarily in Canada as we have the means to avoid being priced out of the food market. Can the present industrial agriculture model be maintained without enough oil for farmers or transportation of that food to distant lands?

Based on the exhaustion of the resource base of our planet, whether it is fish, steel, coal, oil, or other commodities, it seems evident that the long-term carrying capacity of the earth is less than the present world population of 6.6 billion people.  The exact figure is a matter of some debate.  The expected shortage of food will kill billions of people.

3) The airline industry is in serious trouble.  The problem has long term roots in high cost fuel and it is not going away.  Worldwide, airlines expect to lose somewhere between $2.6 and $6 billion dollars in the current year.  Subsequent years will provide further grief with rising ticket prices, lower passenger volume, contracting schedules and bankruptcies throughout the industry. In the long term, perhaps beyond 2015 or 2020, air travel will be available only for the wealthy, government, military, and specialized high value cargo.  There may be a return to nationally owned carriers for small countries who don’t want to be totally isolated when commercial carriers go under.

IATA chief executive officer Giovanni Bisignani notes. “Skyrocketing oil prices are changing everything. The situation is desperate and potentially more destructive than our recent battles with all the horsemen of the apocalypse combined.”

The airline industry misery will spillover to the manufacturers of airplanes, like Airbus and Boeing, as orders are cancelled.  The airlines will need the more fuel-efficient planes but won’t be able to afford to purchase them.

4) The North American auto industry has hit a large pothole and is out of alignment.   GM announces closure of several auto plants featuring large vehicles virtually admitting that peak oil has arrived.  In the short term, people will be scrambling to find cars with the best mileage they can.  GM, Ford, and Chrysler will re-organize to provide cars with better mileage.  They may go bankrupt within several years.

Unfortunately, the best mileage cars are sold in Europe, not Canada.  For example, the Ford Focus diesel gets an average rating of 59 miles per gallon in Australia, the Philippines, Thailand and Europe but not Canada.  Isn’t that strange?

But enough predictions for today.  It’s too depressing.  The geologists and thinkers who believe that energy scarcity will dominate the agenda for the next 100 years were right on target while all of the government agencies and oil companies predicting no problems for the next 50 years had their heads in the sand.  It seems to be difficult politically to admit that oil is a huge problem and we’ve built a society based on a fuel that is disappearing.

Is there hope that we might see our three levels of government take control of the Titanic and change course?  The fog has lifted and the iceberg is before us.  There are things we could do.