Thursday, March 19, 2009

The Cure for Low Prices: Low Prices

Seems that we've been pretty lucky over the past 9 months or so regarding energy prices. Oil's been around $50 per barrel, natural gas was surprisingly inexpensive this winter. Heck, even the electric company sent a friendly flyer with this month's bill that they lowered the price per kilowatt hour.

But an old commodities traders used to say "the cure for low prices is low prices". Last summer, when energy prices were through the roof there was a lot of talk about drilling, searching, conserving and alternativising (my word). That talk has all but been silenced.

When prices fall it just doesn't make sense to keep drilling and searching for energy. It doesn't make as much sense to conserve. And it doesn't make as much sense to put money into an alternative energy source. The payback just isnt there.

But whoa to those who think that the energy prices we pay today are a good foundation to which to base an energy decision. Energy prices will be going up. If you had any doubt of that yesterday, be sure of it today. Geithner just printed up another trillion.

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