Can the Energy Industry's Costly Surprises Be Avoided?

Sticker shock strikes at the heart of any company’s confidence. Unexpected financial burdens can be disruptive no matter how well you’ve budgeted, and when excess expenses become an ongoing occurrence, they can have a real impact on the long-term viability of your business.

And yet, a total lack of predictable pricing has become the standard for one of our economy’s most essential expenditures. The price you’re paying for the power you need to run your business—literally the cost of keeping the lights on—is far from stable or transparent. Instead, the industry is known for its volatility, leaving energy consumers left to brace themselves for surprise spending on a monthly basis.

So how did we get here? And more importantly, is there a way out?

A recent piece of news is an instructive example of the challenges inherent to oil and gas pricing.

The Pursuit of Profits

In April, Saudi Arabia and several allied nations announced they would be cutting their oil supply by a collective 1.16 million barrels per day. It came as a shock to many, including leaders in the United States.

The decision was made by members of the Organization of the Petroleum Exporting Countries (OPEC+). It’s an organization of 13 countries (plus an additional 10 allied nations) that exists to regulate crude oil prices by adjusting the supply provided by member nations. In other words, OPEC+ functions to ensure oil prices don’t dip too low and take “corrective” action when demand drops.

With its collective 23 members controlling roughly 40% of the global oil supply, OPEC+ holds a lot of power in keeping oil prices high. This time, the newly-announced reduction in output comes as an addition to a previously announced cut of more than 2 million barrels per day that runs through the end of 2023. In total, the cuts that are currently in effect represent nearly 4% of the globe’s demand for oil.

Naturally, a significant reduction in the daily flow of oil around the world is going to put the remaining inventory in higher demand, giving OPEC+ members the profits they seek. Unfortunately, that means we all end up paying the price.

An Unpredictable Flow of Energy

As OPEC+ nations tighten the strings on the amount of oil being shipped around the world, consumers are certain to feel the unpleasant effects. Since OPEC’s jurisdiction is over crude oil, the first place you’re likely to see increased spending is at the gas pump. While that’s an unfortunate outcome in itself, it’s also an ongoing reminder that traditional energy costs are sensitive and more price spikes could spring up on a moment’s notice.

In this case, several factors could play into potential shifts that directly affect your monthly energy spending. First, this isn’t the only short-notice change to the global supply of oil and gas in recent memory. After Russia’s unexpected invasion of Ukraine last spring, European and American bans on imports of Russian oil and gas reshaped the energy industry, causing demand for fossil fuels from other producers to skyrocket and placing new financial burdens on many consumers. Europe was hit hardest, casting much of the continent into the throes of a full-on energy crisis.

With the effects of the shortage still looming, plus the addition of a surprise reduction to oil flow from OPEC+, Europe may begin pursuing opportunities to source the lion’s share of its energy from countries that EU leaders view as more reliable industry trade partners. Notably, the United States—the world’s largest producer of natural gas—has already been increasing its exports to Europe. Meanwhile, three of the other top five producers are members of the increasingly unpredictable OPEC+ group.

This leaves the U.S. with the challenge of optimizing supply chains and growing exports while continuing to meet domestic demand. It’s a complicated balancing act that, frankly, leaves a lot of room for a mismatch between supply and demand in the near future, with these inefficiencies being passed along to you in the form of higher costs.

Finally, all of this comes in addition to a fundamental element of the natural gas market that we’ve seen play out numerous times in the last several years—bouts of extreme weather are virtually guaranteed to result in higher electricity prices. Your rates can increase in dramatic ways during the moments when it’s most necessary to ensure you’re able to stay warm or cool. If we see severe weather strike the U.S. during a period of increased foreign demand, we’ll be facing a perfect storm for sky-high energy spending.

The dynamics of global energy trade are shifting in notable ways. Add supply chain challenges and extreme weather events, and we’re left to face a volatile environment for power prices that leaves U.S. businesses vulnerable to significant spending increases on a moment’s notice.

Fortunately, there’s a better way.

Finding a More Stable Source of Power

The reality will always remain the same, whether it’s driven by an act of war, a period of extreme weather, or a decision to pursue greater profits: As long as our energy sources remain dependent on an interconnected global network of oil and gas, the prices we pay will be subject to change at a moment’s notice.

It’s one of the most compelling reasons to make a move away from fossil fuels. By identifying and adopting a more readily available source of energy, the ever-changing flow of oil and gas around the planet will no longer wield power over your monthly energy bill.

This is the promise of renewable energy. It’s also why we (and many others, including the U.S. Department of Energy) believe specifically in the importance of microgrids and other resources for distributed energy. With these tools, energy is created in the very same location where it’ll ultimately be put to use. The middlemen who make decisions designed to maximize their own profits are eliminated. Ultimately, the benefits of untangling yourself from the global flow of fossil fuels in favor of a localized energy source are significant: You’ll spend less money on energy and see more consistent pricing, starting immediately and lasting over the long term.

Talk to Catalyst Power about a Connected Microgrid Solution

On a national level, it’s imperative that we strengthen existing incentives for the development of technologies like microgrids and put new ones in place that provide communities with an affordable, appealing route to localizing their energy supply. Individually, action can be taken right away.?

Catalyst Power exists to help businesses find a more democratized, more reliable energy supply. A microgrid can be installed on your property at no cost to you, bringing the benefits of distributed power directly to your bottom line. You’re certain to see lower monthly energy rates that are locked in for the long term—a serious upgrade from the notorious sensitivity of fossil fuel prices.

Any interaction with the oil and gas industry comes with a whole lot of strings attached. Fortunately, there’s a better option available to your business. The decision to get connected with a local source of renewable energy holds a simple and powerful promise: You’ll be trading in unpredictable, uncontrolled energy prices for new clarity on your everyday spending and a more stable financial future.