Energy Issues: Now What?

Check out these recent headlines:

“Crude Oil at New High Just Above $114; Gas Also at a Record” (Associated Press)

“Producer Inflation Mounts, Fanned by Energy” (Reuters)

“Wholesale Prices Soared in March” (Associated Press)

“McCain Calls for Summer-long Suspension of Gas Tax” (Associated Press)

And my favorite:

“Stocks End Higher, Led by Energy and Bank Shares” (Reuters)

I am happy to see that at least someone is benefiting from the ridiculous energy policies that have been foisted upon the American people over the years. If you have stock in the oil companies, if you trade oil futures, then these record high prices are great news. The environmentalists with their lobbies and their cohorts in the legislature that work so hard to keep us from developing new sources of oil here in the U.S., not to mention new refining capabilities, must be ecstatic. After all, low supplies make for high prices and that leads to great profits. It makes you wonder how much oil stock they own. After all, according to Wavestrength.com’s writers Ann Sosnowski, Sara Nunnally and Bryan Bottarelli in their 2007 article,Trading Strategies: Oil Service Stocks on Fire, “The strategy of buying oil and energy stocks on any near-term dips is one of the simplest winning strategies you’ll ever uncover.” Al Gore’s own former long-term relationship with Occidental Petroleum is well documented and I doubt he is the only one. On the other hand, if you are like the rest of us out here, the high price of gas, heating oil and other petroleum products is not good news. It is a problem and not one likely to be solved by a temporary suspension of the gas tax.

The Roots of this Problem—The Quick Version

One of the reasons cities were so crowded and constricted prior to the advent of the automobile and mass transit was that you really needed to live close to where you worked. It was a situation that existed since the beginning of the Industrial Revolution when slums first sprang up around the factories of England to house the low-wage factory workers. Early American textile factories avoided this problem by housing their workers onsite, a practice that would be revived still later when George M. Pullman, founder of the Pullman Palace Car Company in 1867, created the town of Pullman, the first planned model industrial town, in early 1880. The arrival of mass transit and the automobile changed all that. Americans were free to live where they liked and drive to work. Suburbs developed as Americans spread out on cheap fuel.

Because of this pattern, Americans came to rely more and more on their cars. What was once a luxury item became a necessity. Now, a century later, that necessity has become very costly and some savvy investors are taking advantage of that. The problem is that these speculators are, to a great extent, responsible for the high prices that we pay at the pump! Their activities in the market are one of the major factors in the high price of crude oil.

The Current Situation

I wonder, how long can this last? At what point will prices be pushed to levels where oil, which is a commodity just like wheat or soy, will be so over-valued that a crash is inevitable? When that happens, what will become of these giant energy companies, many of which are simply too huge for the federal government to allow to fail?

The other side of the coin is of more imminent interest: As energy prices rise to these staggering new levels, driving inflation before it, what do we do about the damage it is causing today? Remember: As inflation increases, buying power decreases. If the population cannot afford to purchase things, the economy will grind to a halt. That isn’t just for the big corporations, it’s for everyone and that especially includes small business. After all, small business is not nearly as capable of absorbing things like high energy prices, while minimizing their effect on prices, as large corporations are.

In the U.S. Senate Committee on Small Business and Entrepreneurship, John Kerry’s statement on A Bill to Re-establish a Small Business Energy Efficiency Program, and for other purposes, reported that “The National Small Business Association recently conducted a poll of its members, asking how energy prices affected their business decisions. Seventy-five percent said that energy prices had at least a moderate effect on their businesses, with roughly the same number saying that reducing energy costs would increase their profitability.”

It is rather sobering and, given that there is really no end in sight, it does constitute a call to action. Small business is the real home of innovation in our society because being down in the trenches each day puts American small businessmen face-to-face with the problems they must solve. I would like to tap into that innovative spirit. I am looking for answers here, folks. I want to know what you are doing right and I want to share that wisdom with everyone. As Franklin so wisely said, “We must, indeed, all hang together or, most assuredly, we shall all hang separately.” In return, those whose ideas are chosen will have their small business written up in a feature story either here at gowithabc.com or in America’s Best magazine. You don’t need to be a member; this is open to any small business owner with good ideas. Just send your answers (answer fully but you needn’t write a novel), along with your name, phone number and e-mail address, in case we choose you for inclusion in the upcoming feature article, to webeditor@gowithabc.com. Thank you for your contributions.

The Questions

1. How has the rise in energy costs affected you?

2. Given this climate of rising energy costs, what are you doing to remain competitive?

3. What is your personal outlook on how things will be for your business this time next year?