Gasoline prices are, obviously, soaring (see these nifty graphs for examples from around the region). But I’m not sure we’ve seen the worst of our energy woes for the year. In fact, several trends are converging right now that may augur a repeat of the energy crunch of the summer of 2001.
First, there’s the region’s dwindling mountain snowpack. Snowmelt from the high Cascadian summits powers the region’s hydroelectric dams through the summer. There was decent snowfall this past winter—a little below normal in places, but nowhere near as bad as during the exceptionally dry winter of 2000-2001. But a hot, dry spring has led to an early peak in the snowpack, followed by rapid melting. Today, the snowpack that feeds Seattle City Light’s dams is barely ahead of where it was at this time in 2001. Take a look:
Find this article interesting? Support more research like this with a year-end gift!
These trends suggest that hydroelectric production will be constrained in the coming months, just as it was three summers ago, when a shortage in hydro-generated electricity made it easier for speculators to manipulate the California electricity markets.
Second, there’s natural gas. As I write this, the price of natural gas on the commodities markets stands at about $6.50 US, roughly triple its price through most of the 1990s, and well above the price at this time last year. US natural gas production is actually declining, even as new gas-fired power plants have caused demand to shoot up. (While much has been written about the recent burst of windmill construction in the Northwest, from 2001 through 2003 the region added 17 times as much generating capacity from natural gas as from wind.) Shortfalls in hydro generation over the summer could mean increased demand for electricity from natural gas. That will push natural gas prices skyward—which, again, is what happened in 2001.
And finally, there’s the increasing cost of petroleum. Just a few years ago, the commodities market was betting that a barrel of oil would cost about $22 today. But the price just passed $41/barrel, and the trends are definitely looking “bullish” for oil, as they say in the commodities markets.
Of course, price scapegoating has already started: The New York Times reported today that the oil industry is blaming the high price of gasoline on environmental regulations. This is flat-out pishtosh: the recent increase in the price of gasoline is tracking perfectly with the price of crude oil, and, globally, the price of crude has almost nothing to do with environmental regulations and everything to do with supply (tight), demand (up), and the value of the American dollar (down, over 2 years, vs other major currencies). (This recent graph, from blogger Kash at Angry Bear [where do they get these names] shows the relationship between gas prices and crude oil prices.)
Now, there’s no guarantee that these trends will continue through summer; energy prices are notoriously volatile. But if current trends continue, shortfalls in hydro, coupled with tight supplies and high prices in the petroleum and natural gas markets, could make for a “perfect storm” for energy prices, a triple blow that could bring energy issues to the forefront as in no time in recent memory.
And if it sinks in that this is more than just a passing crisis, this summer’s energy woes may teach the region a lesson that it can learn in perhaps no other way. Simultaneous high prices in oil, gas, and electricity can serve as a reminder that we’re in the thrall of an energy system that we fundamentally do not control. Our dependence on fossil fuels shackles the Northwest’s economy to distant oil and gas wells in some of the most unstable parts of the world. It subjects our fortunes to wild swings in energy price and availability. It siphons money out of our region to fill the far-off coffers of petroleum companies.
The first step towards conquering dependence is simply admitting you have a problem. This summer could make that problem abundantly clear.