According to the latest release of the Associated Press at the time I’m writing this column, a barrel of crude oil topped out at $114.  This is quickly approaching twice the price it was this time a year ago.  This equates to a national average of $3.38 per gallon for gasoline and $4.11 for diesel fuel.  The worst news is that most forecasters believe four dollars for a gallon of gas will be common by the end of this summer. 

Last year the reason for the high prices was blamed on supply and demand issues.  Now the latest studies indicate that demand is down throughout the United States and supplies have remained constant.  So why has the price increased if demand is actually down?  Analysts now point toward the lower value of the American dollar compared to the Euro.  The high rate of home foreclosures, low interest rates, and the threat of a recession have depreciated the value of the dollar significantly in the past year. 

As fuel costs continue to rise, so does the cost of everything else.  Food, building materials, and consumables all have increased in price as well as energy costs.  Everything seems to be going up except people’s wages.  I am not sure what ultimately determines whether we are in a recession or not, but we have to be dangerously close now.  It seems that the best way to correct our economy and get things back on track is to get the fuel situation under control.  If gasoline prices were to only drop to last year’s levels, I think the economy would start to correct itself and we would all feel some relief. 

As we approach the summer months, we expect French Broad EMC’s wholesale fuel charges to increase dramatically as well.  The cost of coal and natural gas continue to rise and with the increased demand for electricity the hot days bring, we can expect to see these increases hit our monthly power bills.  Even with the recent rains, we are still well behind normal rainfall levels for this time of year.  If the drought conditions linger on into the summer months, electricity generators will not be able to meet the high demands with their base load generation.  This will force them to either purchase high cost electricity from other sources or they will have to run their highest cost generation facilities to supply the peak demands.  Either way will result in higher wholesale fuel charges for all electric utility customers.

Thank You,
Jeff Loven
Email: jeff.loven@frenchbroademc.com


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