Losers in a high energy cost economy
Yesterday I mentioned the high cost of the competitors for atomic energy in America. The fact that energy is far more expensive now than it was just two or three years ago is not really news – radio, television and newspaper articles that talk about gasoline prices are published with great regularity. Gasoline prices are also a topic of innumerable conversations at Little League ball games, over coffee, at the water cooler, and even on blogs.
What is not so common are stories from people whose businesses face severe impacts because of the current energy price situation. Finding those stories takes more dedicated searching; everyone sees gasoline prices, but not everyone works in a business where energy is a large portion of the cost. Most people also do not realize how much energy prices can vary by location and how those regional variations can affect the ability of businesses to compete or even to remain in business.
I found a neat video at Watch Cool Stuff Being Made: Glass Manufacturing At PPG’s Meadville, Pa plant. This 7 minute clip provides a fascinating look at the process of making flat panel glass. When you watch it, listen to the narator carefully. At each step of the process from transporting the raw materials, to heating the materials to near 3000 degrees F, to flattening, smoothing, cooling, cutting, and shipping there are significant energy inputs, especially in the form of electricity and natural gas. Glass manufacturers use these two energy sources because glass making requires clarity – coal substitution is not an option.
According to Challenges Create Opportunities for Flat Glass Industry which was published in early January 2001, when natural gas averaged about $2.50 per million BTU for manufacturers, the high cost of natural gas required energy surcharges to be added to glass prices. Care to guess the effect of $8.80 per million BTU gas prices, especially when competitors in other countries pay less than half that price for their gas? Will customers continue to pay surcharges if they can simply buy their glass elsewhere?
