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Natural gas prices are on the rise. This is not an opinion, it's a fact. We've all seen the evidence, in the news and now in our utility bills. And while it may not seem so extreme on one monthly bill, the larger reality is quite severe. Depending on whom you ask-Goldman Sachs, the Energy Information Administration, Forbes magazine and so on-prices are up more than 100 percent since this time last year.
What's going on? The reasons behind increasing natural gas prices are varied. Ultimately, however, the answer lies in an economic force we are all familiar with-supply and demand. The concept is simple, and works the same way as any other commodity that is traded on the markets: the higher the demand for any given product, the higher the price. It stands to reason then, that any force that would increase demand on a product would consequently increase the price. So, why is New York advocating for the increased use of natural gas? Do state officials envision fracking to increase natural gas supplies?
Recently, the state Public Service Commission started looking into extending natural gas service mains to areas of the state that are currently off the grid. The move supposedly is intended to help consumers save money on energy and boost the overall economy of New York. But this seems a bit misguided given the latest swings in natural gas prices, not to mention the costs associated with running new gas lines, importing more natural gas to serve more than 1 million new customers, and converting all those residential heating systems to natural gas. How is that supposed to save customers and taxpayers money?
The reality is that all forms of energy have ups and downs in price, which makes a strong case for encouraging fuel diversity in our state, as opposed to narrowing the field to just one energy supplier. This is especially so in light of the tremendous gains oil and modern oil-fired equipment have made in efficiency and environmental sensitivity.
Today's heating oil equipment now runs more than 90 percent efficient. Add to that the radically reduced emissions that come from blending ultra-low sulfur heating oil with a biofuel component, and you've got a fuel that outpaces any other in terms of environmental responsibility. In fact, according to New York City's Clean Heat program, "ULS 2 has close to zero soot emissions, the lowest of all conventional heating fuels," which means cleaner air for buildings and the community.
And what about all the small businesses that will no longer exist after the state and the natural gas industry, working together, force them and other associated small businesses to close shop? The home heating oil industry in New York is comprised of mostly independent, small, family-owned businesses. Not only will thousands of bread-winning jobs be lost, but so will the billions of dollars in tax revenue that those businesses bring into the state. We will all experience the economic shift when thousands of small, community-based businesses are replaced by several large, monopolized utilities.
Are the gas utilities even prepared to handle this? They already have thousands of interruptible customers that end up being curtailed during periods of peak demand for natural gas and told to switch to heating oil. Will they really be able to take on an additional 1 million households, should this natural gas expansion plan be approved?
As the owner of a heating oil company, I am very concerned about the PSC's interest in facilitating such vast natural gas expansion. For years, the heating oil and natural gas industries have competed for the same pool of customers. And while the natural gas industry has the edge of utility dollars to fund their marketing, we have-up until this point-competed against one another in a fairly free market. What the commission is proposing would end all that. Businesses like mine would bleed out market share and most likely go under, taking our employees and the families that depend on them down with it. For my company, that means more than 75 families.
Energy reliability and economic growth are about maintaining and encouraging diversity, both within the energy landscape and in the marketplace. It's time that New York recognizes this and rethinks any plans to essentially eliminate the heating oil industry by promoting and subsidizing this ill-conceived gas expansion program.
Jim Buhrmaster is owner of Buhrmaster Energy Group in Scotia.
7/5/13 (c) 2013 Rochester Business Journal. To obtain permission to reprint this article, call 585-546-8303 or email email@example.com.