Cheap Isn't Free
By Will Jackson
On November sixth of last year, a meeting took place in Vienna, Austria that would decide the direction of gasoline prices all around the world. Those attending the conference of the Organization of Petroleum Exporting Countries, otherwise known as OPEC, were representatives from Iran, Iraq, Kuwait, Saudi Arabia, Venezuela, Qatar, Libya, the United Arab Emirates, and Algeria. For decades, this small group of nations controlled much of the world’s energy supply, able to manipulate global energy prices to benefit themselves. The reason for their meeting was simple; this era is coming to an end. Through the invisible hand of supply and demand, the recent boom in United States natural gas production has caused energy prices to drop worldwide, pinching the pockets of these once-titanic oil magnates and testing the resolve of their collusive strategy, thanks to America’s signature sting of capitalism.
Their options were to continue producing oil at a much reduced price making less profit per barrel, or to cut back production to inflate prices? According to the OPEC press release,“The Conference concurred that stable oil prices... were vital for world economic well-being,” leading to their decision “to maintain the production level of 30.0 mb/d, as was agreed in December 2011.” In more simple terms, they decided to allow the unprecedented decrease in oil prices we have all witnessed and benefitted from over the past four months. The question then became; how would this affect our everyday lives?
While we have all enjoyed a quite pleasant fill-up of our wallets and tanks over the last few months as a direct result of these dropping gasoline prices, not all energy has become cheaper. Clemson University procures most of its energy from three sources sources; Duke Energy, Piedmont Natural Gas, and Fort Hill Natural Gas. The appearance of shale natural gas, the wonder-child of our American energy revolution, may have caused gasoline prices to fall, but it is that exact same price drop that is putting pressure on natural gas suppliers to continue production.
The economics go something like this: natural gas appears a few years ago, flooding the energy market with expensive supply to meet the ever-growing domestic energy demand that was pushing gasoline prices upwards of $3.50. As more natural gas was discovered around the United States, production increased, pushing even more natural gas onto the market and thus lowering the price, and driving the price of gasoline down. Now this is great for us, but the expensive nature of shale gas production eventually caught up to these eager producers, and with oil prices slipping fast, more and more potential buyers turned back to oil, forcing some natural gas supply to plateau. As natural gas supply flattened in the latter part of 2014, its price jumped, by 26% in the southeast to be specific. This left Clemson University, which relies on natural gas for most of its energy, with a 36% increase in it’s utility bill. To put that figure in perspective, the university spent $561,000 more in the months of November and December of 2014 compared to those same months of 2013. Furthermore, utilities are not paid for by the state of South Carolina, which means they fall under what are known as “University Generated Funds.” In other words, tuition. To break that down, with 69% of Clemson’s undergraduates in-state and 31% out of state, a total of 34 incoming freshmen had their entire tuition bill absorbed by the increase in utility spending by the university as a result of this dramatic shift in energy prices, in only two months.
To many of us, energy is a vague shadow, operating behind the scenes of all the things we take for granted. Some of us wake up in dorm rooms, some wake up in apartments, some in homes. We all expect hot food, well-lit rooms, and a day without Netlflix nowadays nearly equates to torture. The closest we get to understanding the true cost of energy is those bright signs on the side of our highways telling us the price of gasoline, and even to that fraction of us students who are familiar with the pump, the picture painted there doesn’t reflect the true cost of powering our lives. To Clemson University, the place we all call home, the last few months have felt a lot different than they have for us at the local Quik Trip. Death Valley, as we all know, is the heart that pumps orange blood. That blood just got a whole lot more expensive.
