Headline: Higher Oil Prices Raise Profits for Exxon and ConocoPhillips

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The New York Times picked up a Reuters story indicating, guess what that will oil prices back up to near $80/barrel for the first quarter, oil companies profits are up.  And with energy analysts expecting oil prices to go higher, we can expect oil company profits to climb.

It would be much better to see headlines like “Higher Oil Prices Mean Bigger Savings for Home-Owners Who’ve Improved Efficiency”.   Prices will rise.  But there’s no need to wait to start saving.  Save now, save more later!

Here’s hoping Home Star will help spur things along.  The more we spend on energy-efficiency, the more we save.  The more we spend on oil…the more we spend.  And we’re not just paying for the oil.  Our tax dollars are paying for containment with the massive oil spill in the Gulf.  Our tax dollars will pay for cleanup there.  And we’ll pay higher food prices as Gulf fisheries are devastated.  Some day, we’ll pay for the effects of the pollution from oil we toss out into the atmosphere.  

We’ll always need energy–but less is more.  Invest in energy-efficiency and save.  Or spend for energy now, and spend again for energy later, and keep on spending.

Thanks,
Mike

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4 Responses to “Headline: Higher Oil Prices Raise Profits for Exxon and ConocoPhillips”

  1. mike Says:

    Explain the link between oil prices and electricity and natural gas prices (i.e., the prime fuels in home energy use)? Pretty sure there is little if any proven link. I agree investments in energy efficiency often make sense, but please don’t muddy the waters any more than they already are.

    • greenhomesamerica Says:

      Good question! Actually, there is a proven link. Natural gas prices track very well with oil prices. This wasn’t always the case. Natural gas used to be a very local, then regional product. It is essentially now a global commodity. The price data is available from the Energy Information Administration. Some costs are production related. Others are tied to market players who control gas and oil. To some extent we also see fuel shifting (more on that later). It’s even been in more mainstream news for years, and I’d direct you to this NY Times article for a quick overview.

      In the U.S., most homes are heated (and heat water) with natural gas. In the Northeast and Upper Midwest in particular, there are also still sizable percentages that heat with fuel oil. Smaller percentages use propane. As such, how much a household pays for energy is indeed tied to oil prices. In the case of home heating oil, the prices track very closely with the broader oil market, and home heating oil prices can be very volatile. Propane is much the same. Natural gas tends to be delivered by regulated utilities, so the volatility gets smoothed out some for homeowners–the natural gas rates homeowners see don’t bounce around like the oil prices you’ll see in the news. But when average prices for oil are up, natural gas prices rises for utilities, rates are adjusted by utility regulators, and home gas prices go up. This appears more as a step function at the monthly, quarterly, or annual scale rather than continuous price adjustments the market sees. For a good example, Google natural gas price prices paid by homeowners in 2007 and 2008–you’ll see many stories of steep increases, increases because natural gas market prices were tracking oil–and they bottomed out like oil when the economy crashed.

      I didn’t mention “electricity” in the post–I used “efficiency” and “energy-efficiency”–and the statement holds true as described above even without considering the electric side. However, you can also look at electricity prices. And you’ll note the trends hold. The rise isn’t as steep, but it is generally there. Note also, much electricity is often purchased on long term contracts, and these, too, tend to smooth volatility, especially for residential customers in most areas. (Utilities, though, often pay steep prices for electricity at the margin, and these costs do eventually get passed to homeowners). In the U.S., we don’t generate much electricity with oil. 50% of our generation comes from coal. But most people don’t want coal or nuclear plants in their backyard. As a result, most of the new electric generation that has come on line in recent years is natural gas. And natural gas prices? Yes, as mentioned above, they track well with oil prices. Natural gas and oil account for 20% of our electricity production. Because of a variety of generation sources, including nuclear, coal, and hydro, the effect on electric rates is dampened. But it is there nonetheless.

      As an aside, for those looking down the road, the story with electricity doesn’t end there. A long term trend that is developing is moving more of our transportation from petroleum to electricity. This is a neglibile amount right now. Continued movement in this direction, regardless of the driving force, will put increasing demands on electric generation. Supply and demand.

      While this is but a quick thumbnail view, the link is most definitely there.

      Thanks,
      Mike

    • greenhomesamerica Says:

      P.S. To carry this even further, and show even stronger reasons for efficiency from a national economic perspective, you should look at the links between oil prices and both the U.S. trade deficit and the value of the U.S. dollar. Interesting links there, too.

  2. Rebecca Says:

    I love your posts. We share the same passion of inculcating go green attitude to the minds of people.

    Is there any other way to contact you. I just have a good business proposal to make. I would really appreciate it if you can respond to this.

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