Invest some of this cheap energy

by Philip Brewer on 20 October 2008 4 comments
Photo: Philip Brewer

I've tried to avoid predicting energy prices, except to say that they'll be volatile.  I'm not a bit surprised to see oil and gasoline prices dropping by half in the past few months.  I do think, though, that the long-term trend is up.  If I'm right, you should seize this opportunity to invest some of this cheap energy for the long term.

The thing is, energy is hard to save.  The most efficient system for storing electricity involves pumping water uphill so that it can run back down through a generator--not practical for your average homeowner.  Storing gasoline in quantities beyond what fits in your car's tank is similarly tough--the stuff is toxic and explosive, plus it'll evaporate on you.  Natural gas is even worse.  (There is the bank of gasoline, but those sorts of schemes are all too prone to go bust in times of economic stress or spiking energy prices--i.e. just when you need them most.)

The solution is to use the energy to produce something of enduring value.  Something that you do or make now with cheap energy won't have to be made or done later with expensive energy.  If the thing you do or make actually produces or saves energy (putting up a windmill, say, or adding insulation to your house), so much the better.

If you own land, for example, this is a great chance to make the sort of change that's easy with cheap energy--digging ponds or ditches, building up berms, etc.  A change to the contour of the land could be made now and last for generations.  A solar power system could last for the rest of your life.  A more-efficient furnace could last 20 years.

You're doing this in a small way anytime you buy something that will last.  As you make such purchases, give some thought to what things have already become cheaper because of dropping energy prices, and remember which things shot up the most when energy prices were spiking.  Those are good guides of where to focus.

If the economy were doing better, I'd point out that this is also a chance to just spend some energy.  A winter road trip is going to be a lot cheaper than a summer one would have been.  Airfares haven't come down much yet, but cheap fuel and a collapsing economy will likely mean a shot at low-cost flights.  (It also means a shot at bankrupt airlines, so make sure your plans allow for that possibility.)  As things are now, though, I can't really recommend just spending energy.  Invest it.

Energy is likely to stay cheap for about as long as the economy is in recession.  Energy that you can invest now, while it's cheap, is energy that you won't have to buy later, when it may be a lot more expensive.

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Guest

Unlike gasoline, diesel fuel can be stored safely for a significant length of time.

And diesel can power both your vehicles and a home emergency generator.

A diesel genset is more expensive, but is also more fuel-efficient than a gasoline generator.

As is a diesel-powered vehicle.

After the gas shortages here in the southeast post-Hurricane Ike, my next vehicle will be diesel-fueled.

And I'll have a heating oil tank, but filled with on-road diesel.

Philip Brewer's picture

Having a nice supply of diesel is a great idea.  It's not too tough to get a 1000 gallon tank (although they're a pain if they start to leak).  That's a good bit of home heating--if your house is well-insulated or you live in a warm climate, that might last for years.  (Kind of expensive, though--diesel will run you at least $1 more per gallon than fuel oil.)  It might be enough to drive your car for years, too, if you've got a very efficient car and you don't drive too much.

A stockpile like that can be great for smoothing out spikes in fuel prices.  You could, for example, arrange to buy $1000 worth of diesel every year.  In years when fuel was cheap, you'd use less than that and your tank would gradually fill.  When fuel was expensive, your tank would gradually empty.  (Or you could just pick a time that you thought diesel was cheap and fill your tank--your basic dollar-cost-averaging versus market-timing decision.)

A tank full of diesel is a solid choice for one chunk of your investment budget.  As a bonus, unlike with your financial investments, you won't have to pay capital gains taxes on your profits!

lghbob's picture
lghbob

 

 Phil said:

"The most efficient system for storing electricity involves pumping water uphill so that it can run back down through a generator - "

 

This rang a bell with me.  In 1972, I lived inGreenfield Mass, nearby to the Northfield Mountain Hdro Plant, which was finished in that year.

 

At the time, it was a marvel of science.  They filled in the space between mountains to create a lake... then built a tunnel to the river a half mile away.  A combination 8 foot in diameter reversible generator/pump, allowed them to pump water to fill the lake, at night, using off/peak electric rates, then, during the day, allowed to water to flow out powering the generator during the day.

 

All self contained... virtually no net energy loss.

 

Clever people those yankees... 

 

http://www.firstlightpower.com/generation/north.asp 

 

During the same period, I also worked near Bennington Vermont, (during the 1974 energy crisis)  and watched as some home owners on the Walloomsac River, built their own hydo plants, on their own property... then fought a successful legal fight to force the electric company to buy back the electricity that they produced....  I'm not sure, but I think that may have been a landmark ruling, at the time.

 

The process of selling energy back to the power company, is called "net - metering" .  It's an evolving activity, worth googling for a look into the future. 

 

my opinion only

Guest's picture

I have a small amount of land and much was not useful to me because of the tall pine trees that cast so much shade. I thought that a back hoe service would be astronomical to clear out the stumps, but it turned out to be very reasonable. I'm looking forward to a couple hundred dollars making my land eminently more usable, and I think I'm going to have him dig for a small pond and move my catfish in there for good free food for years to come.