[MonteQuest]

The Power of Rising Energy Prices

$this->bbcode_second_pass_quote('', 'F')or 35 years, the aluminum plant surrounded by fields of soybeans and corn in Frederick County has provided high-paying, reliable jobs that lured workers from faraway states.
But now the plant's owner, Alcoa Inc., is warning the 600 employees that they could be out of their jobs for a reason well beyond their control: soaring electricity prices brought on by deregulation. The company says it can run a plant overseas for a fraction of the electricity costs at its Maryland site.

Similar forces are at work in Europe, where plants are closing. Production is shifting to places where power is cheaper, such as the Middle East, Russia and China.

[Leanan]

Pretty ironic, isn't it? Large corporations that once called for deregulation are now calling for more government regulation. They think the cost of energy should be only what it costs to extract the coal or oil from the ground.

This could be pretty bad for us in the long run. We're outsourcing all our infrastructure and expertise. When TSHTF, will we be able to rebuild the manufacturing base that will allow us to build nuclear power plants, wind turbines, solar panels, bicycles? Maybe, but it's going to be difficult in an energy-poor world.

[rogerhb]

The problem being that it is cheaper to buy horse-power from cheap energy than from people. There could be a transition point once energy is more expensive than horse-power from people.

[BW3]

In the Pacific Northwest, aluminum is referred to as congealed electricity.

[green_achers]

In the Middle Ages, aluminum was more valuable than gold.

I throw scrap aluminum under the house. Some day it'll pay for the grandkid's college.

[Shadizar]

I think this is a trend that has been going on for a long time and will only get worse. The bottom line is really the only thing that matters to many businesses (and why not in our economic model?).

They really have no choice but to adapt to economic conditions. If prices for labor and materials are higher they cannot compete with say, Asia...

The U.S. service economy is a direct example of that. I try to buy American but in all honesty it is hard to buy that way when 90% of products now are made in foreign countries, and made much cheaper. If you don't believe this, just take a look at the product package to see where an item is made. I always take a look.

Companies that manufacture in the U.S. simply cannot compete with the bottom line of companies (or factories) that operate outside of it. This will have a detrimental effect on the industry of the country. The "service economy" is a joke. We only "service" each other.

I don't see any way around a leveling of wages and reduction of living standard (except for the upper class who invest overseas anyway). We've already seen the effects of it in the exodus of industry in the U.S. I believe we'll see more of it as energy prices continue to go up (long term).

-Shadizar

[cube]

$this->bbcode_second_pass_quote('MonteQuest', '.')...
No alternative energies, no conservation; just move operations to a better bottom line.
.....

[shakespear1]

This is a good example how shifting of industry play out as the energy costs rise. Thanks for this info

[Revi]

We are usually told that factories relocate for cheaper wages. I wonder how many relocate because of cheaper power? Maybe that's one of the reasons that industry stays in an area. I know that there is a lot more manufacturing going on up in Quebec. They have electricity at 3 cents a kilowatt hour, Canadian! We just bought a maple syrup evaporator from Quebec, and I have friends that buy woodstoves and soapstone from there. They can still make things, and yet labor costs are as much as ours. What's up? It could be the energy costs.

[retiredguy]

I used to know someone who did IT work for Alcoa. He always hated making site visits to plants because they always were located in remote areas. When I asked why, he said Alcoa always sited plants where they could get cheap electricity. As someone else said, aluminum is congealed electricity.

Industries are always looking for ways to reduce costs. If energy is the most expensive component of your product, you are going to look for the cheapest source of energy. Probably in some Third World country that borrowed money from the IMF to build a generating plant.

[Leanan]

A lot of "heavy" manufacturing has been relocated near overseas energy sources. And it's not always hydroelectric. I believe many aluminum plants are now in Africa, where natural gas is dirt cheap.

This is why the numbers that show our economy has grown more "efficient" should be taken with a grain of salt. Energy used in another country isn't counted, even if the products it creates are shipped and used here.

[MonteQuest]

$this->bbcode_second_pass_quote('Leanan', 'T')his is why the numbers that show our economy has grown more "efficient" should be taken with a grain of salt. Energy used in another country isn't counted, even if the products it creates are shipped and used here.

[cube]

$this->bbcode_second_pass_quote('Leanan', '.')..
I believe many aluminum plants are now in Africa, where natural gas is dirt cheap.
.....

[BabyPeanut]

$this->bbcode_second_pass_quote('', '[')url=http://quote.bloomberg.com/apps/news?pid=10000006&sid=ajXPNRV_Y7FU&refer=home]U.S. Economy: Energy Imports Lead to Record Trade Gap (link)[/url]
Nov. 10 (Bloomberg) -- The U.S. trade deficit widened to a record $66.1 billion in September as petroleum imports surged after Hurricane Katrina disrupted production in the Gulf Coast. Exports declined by the most in four years.

[rogerhb]

$this->bbcode_second_pass_quote('Leanan', '.')..
I believe many aluminum plants are now in Africa, where natural gas is dirt cheap.
.....

[lakeweb]

$this->bbcode_second_pass_quote('cube', 'M')aybe somebody should come up with the bright idea of building a LNG (liquidfied natural gas) terminal in Africa so they can export it. With the current prices of natural gas I bet there's more money to be made by selling it on the open market rather then using it to produce electricity for aluminum production.