ENERGY ECONOMICS

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ENERGY ECONOMICS

• Presented by
• Bob Joblin
• 15 May 2006

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The energy crisis has not yet overwhelmed us,
but it will if we do not act quickly...

• It is a problem we will not solve in the next
  few years, and it is likely to get progressively
  worse...  We simply must balance our demand for
  energy with our rapidly shrinking resources.
•                         -- President Jimmy
  Carter (April 18, 1977)

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ENERGY COMPETITION

• Simply put, the era of easy access to energy is
  over. In part, this is because we are
  experiencing the convergence of geological
  difficulty with geopolitical instability... We
  are seeing the beginnings of a bidding war for
  Mideast supplies between East and West."
• -- David J. O'Reilly Chairman and CEO,
  ChevronTexaco Corporation
• (February 15, 2005)

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ENERGY FACTS OF LIFE

• The U.S. has less than 5 of the worlds
  population but uses about 25 of all energy
  produced.
• China and India are now competing with the U.S.
  for every barrel of oil, every b.t.u of natural
  gas and every clump of coal.
• There is a finite supply of fossil fuels.
• Therefore, prices will continue to go up.

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HOW HIGH IS UP?

• Natural gas prices for November 2005 delivery
  closed at 14.196 per thousand cubic feet
  Natural gas now costs more than three times its
  average of 4.70 from 2000 to 2005 and seven
  times the 1990s average price of 2 a thousand
  cubic feet.
• Source AP (September 30, 2005)

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NATURAL GAS PRICES IN AR

• (Dollars per
  Thousand Cubic Feet)        
• 2000 2001 2002 2003 2004
  2005
• Residential 7.43 10.03 8.95 10.33 11.73 13.59
• Commercial 5.41 7.80 7.05 7.67 8.86 10.2
• Industrial 5.23 6.38 5.64 6.94 8.03
  9.42
• Source Energy Information Agency, DOE

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ENERGY FUTURES

• Oil analyst John Kilduff of Fimat USA in New
  York said there would be a "painful runup" in
  gasoline prices as summer approaches, and he said
  oil prices could rise as high as 80 by the end
  of June.
• Source AP (April 19, 2006)

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ENERGY SPECULATION

• Oil could reach a super-spike of 105 a barrel.
  -- Goldman Sachs (March 31, 2005)
• Expect oil at 150 in a decade no one has
  discovered a great oilfield in over 35 years. --
  Jim Rogers, Quantum Fund (April 28, 2005)
• Crude oil prices could touch 380 a barrel by
  2015. -- Patrick Artus and Moncef Kaabi, French
  investment bank Ixis-CIB (April 21, 2005)

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ENERGY PRICING

•    When gasoline prices peaked at 3.06 on
  Sept. 5, it was partly because the nation's
  refineries were getting about 99 cents on each
  gallon sold.  That was more than three times what
  they earned a year earlier when gas was 1.87.
•    Oil companies produce a barrel of oil for
  about 20.  When the selling price goes above
  that, the increase is almost all profit.
• Source The Washington Post (September 27, 2005)

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ENERGY REALITY

• Natural gas drilling is at an all-time high, but
  demand continues to outpace supply.
• Oil prices are at or near record highs, and
  refineries are operating at capacity.
• Increasing foreign demand for coal puts pressure
  on its pricing.

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WHAT TO DO?

• Lower energy costs.
• Use savings to pay for improvements.
• Select capital improvements that will lower
  energy consumption and on-going operational
  maintenance costs (not necessarily the cheapest
  front-end cost, which will almost always
  increases operational maintenance costs).

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VARIOUS WAYS

• Cash
• Bond issues
• Leases
• Performance Contracts
• B.O.O.M (Build. Own. Operate. Maintain.)

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THE HVAC FACTOR

• 40 of all energy consumed in the U.S. is used to
  heat and cool buildings.
• All buildings over ten years old are heated and
  cooled with inefficient equipment (by todays
  standards).

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Garrett Office BuildingsOklahoma City, OK
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VAV (variable air volume) Building 15,000 Sq. Ft.
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Geothermal Building 20,000 Sq. Ft.
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Garrett Office Buildings 2000 Energy Consumption
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SAMPLE ENERGY SAVINGS
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SAMPLE CASH FLOW SAVINGS
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POSTSCRIPT

• AT PRESENT CONSUMPTION RATES, THE WORLDS KNOWN
  RESERVES OF CRUDE OIL WILL BE EXHAUSTED IN A
  LITTLE MORE THAN 40 YEARS.
• -- Congressman Roscoe Bartlett (R-MD)
• Member, House Science Committee Subcommittee on
  Energy
• (March 14, 2005)

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The Industry Agrees

• Exxon Mobil President Rex Tillerson says the
  world may still have more than 3 Trillion
  barrels of oil available from all known sources.
• The world now uses about 29 Billion barrels a
  year.
• Oil consumption is growing at 3.4/yr.
• Thats works out to a 45-year supply.

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WHATS NEXT?

• "I'd put my money on the sun and solar energy.
  What a source of power! I hope we don't have to
  wait 'til oil and coal run out before we tackle
  that." - Thomas Edison
• (The sunlight that intersects the earth in 24
  hours contains more energy than all the
  conventional oil that has been or ever will be
  extracted from the earth.)

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JOBLINASSOCIATES

• Bob Joblin
• 501.868.6400
• joblin_at_sbcglobal.net
• Little Rock, Arkansas