[JayHMorrison]

I happened to be watching CNBC this morning when they were interviewing the CEO of International Paper.

They were discussing costs and the topic of energy came up as being a large expense item this year compared to last year.

The CEO said that in the past 12 months IP has reduced it's Natural Gas consumption by 40% by making new investments in capital projects for equipment that uses 40% less Natural Gas.

His quote was something like, "These capital projects did not make sense at $3 Natural Gas. But at $6 Natural Gas, it was a no brainer to buy new equipment that was more energy efficient."

Economics are funny like that.

[pip]

I've mentioned it before, but the refinery where I work is doing a lot of energy reduction projects now that would not be happening with cheap natural gas. I don't think the general public realizes how much the Rate of Return on projects drives what companies do.

[Aaron]

What's not so funny is the reason behind their decision to install more efficient equipment. $6 gas.

Given the outrageous increases in gas pricing recently, (as much as 600%), amid massive & growing demand, savings like these just translate into slightly lower gas prices in the market, encouraging consumption & growth. If the global economy does not slow down, then gains of efficiency get gobbled up by increasing demand.

On the backside of the gas cliff, where supplies fall short of demand more each year, our economies must follow this by decreasing consumption.

Shrinking...

The substitutes we will use to fill the gap will be more expensive than their predecessor. How quickly the decline accelerates is key. But it seems likely that without global demand dropping in step with declines in supply, the effect of the downslope is magnified.

[PhilBiker]

The paper industry uses massive amounts of gas.