Millions of Americans may not be able to afford heat or power this year
So, I spent almost $2,000 today … to fill up our oil tank. We heat primarily with wood, but we use oil as a backup system to keep the pipes from freezing and occasionally on days when we’re going to be out for an extended period. Our hot water is also heated with oil. For whatever reason, most oil heat in the U.S. is in the Northeast, mostly in towns beyond gas lines like mine. I suspect today’s purchase may well be the last tank of heating oil we ever buy. Unfortunately, that’s not true for most Americans.
Now, at our comparatively low rate of use, I can expect 400 gallons of oil (at $4.13 gallon) to last us at least three years. Could we do without it entirely? Absolutely, but it is a nice cushion — I’m fond of the occasional hot shower, and it means on occasional busy days when we’re out, we don’t have bank the stove for extended periods (and thus create more particulate emissions). It acts as insurance so that the pipes don’t freeze when we’re away. And it means my mother doesn’t have to dress up like the Michelin man to sleep in the back bedrooms the stove doesn’t reach when she’s visiting in the winter. Although at these prices, Mom might have to suck it up, or we’ll move a futon in near the stove.
Since I don’t think oil prices are going down anytime soon, and various sources in the know including OPEC and Goldman-Sachs are predicting $200 barrel oil by the end of this year, this actually doesn’t look like a bad deal. But most people don’t have our fairly casual relationship to their source of heat. And, of course, we cut wood from our property, rather than paying $200-350 a cord as many wood burners do.
The combination of laying out such a huge sum and Gail the Actuary’s latest article on the frailties of the electric grid got me thinking more about an article I wrote a couple of years ago. In “It isn’t grid crash that makes the lights go out,” I argued that most of us should prepare for life without electricity, not out of fear of the loss of the grid but because of a real likelihood that many of us may not be able to afford the electric bill. Unfortunately, I think this prediction is more true now than it was when I wrote the original essay.
Looking at my 2K oil bill, I can foresee what is going to happen to large numbers of my neighbors around their oil and gas bills. It started this winter. Around here, the minimum oil deliveries are 100-125 gallons — it isn’t worth their while to haul out the truck to give you 25 gallons. But as 100 gallons starts to cost $300 or $350, it becomes less likely that low income families can come up with that amount, much less fill a large oil tank.
And most of them don’t see a tank lasting 2 years — the average American household in my region (where our record low is negative 30 degrees) uses almost 500 gallons a year. By fall, if oil prices continue to rise (and there’s no evidence whatsoever that demand will fall, and a good bit of evidence that producers can’t produce more), which seems extremely likely, heating oil is likely to rise to between $5 and $6 per gallon.
That would make even a bridge delivery of 100 gallons cost most of the monthly paycheck for a working-class family. Hell, it would be pretty much all of our discretionary income. And since most families use about 100 gallons a month in the cold weather, that’s going to be a big deal. Already, 16 percent of all Americans plan to use their tax rebates to pay utility bills. National Grid reports that 10 percent of all customers are more than three months overdue on their electric bills, and natural gas companies have similar difficulties. Heating oil companies are going out of business because they can’t collect overdue payments, and those remaining are unlikely to extend credit next fall.
That means the 8 percent of Americans who heat with oil are likely to be casting around for options to allow them to both eat and keep tolerably warm — probably electric space heaters and wood heat. But with wood up at $250 a cord or more in many areas, electric prices rising steadily as well, and capacity tight, tens of thousands of new high demand electric heaters are likely to present problems — both for the private users and for the electric infrastructure as a whole.
As Gail Tverberg’s article suggests, particularly in areas like the Northeast corridor where the grid is already vulnerable, the addition of these loads may represent a real threat to grid stability. Any modernization or added capacity will likely bring prices higher.
The cost of natural gas has also risen over the last few years, with mild winters helping to keep this from entering a crisis situation. But North American gas is already past its peak according to Julian Darley, author of High Noon for Natural Gas, and over the coming years, there are likely to be sharp price rises and competition with Canadians, who, not unreasonably, would like to use their gas for home heating too.
NAFTA trade requirements now have Canada selling most of its natural gas to the U.S. — but one cold winter in which Canadian needs can’t be met is likely to lead to a change in that situation — and if Americans have to rely on their own natural gas, prices will be vastly higher and supply much lower. It is also worth noting the vast rise in proposed new natural gas electric generating plants — we are building our electric capacity based on gas supplies that aren’t terribly secure.
Meanwhile, as people turn to other utilities, replacing their oil bills with natural gas or electric bills, the number of people who are struggle to get by is set to rise for a whole host of reasons — higher food prices, rising unemployment, the stripping of benefits from jobs, rising medical costs for aging baby boomers — the whole shebang. And that means less ability to pay new bills. Which means indebtedness to utility companies. And that means shut-offs. This is likely to be especially acute in cold climate areas, but the American South uses more energy than the North does, and is generally poorer, so this is pretty much an equal opportunity problem, with different periods of seasonal crisis.
Getting shut off is easy. Getting put back on is hard — there are hefty fees from your utility company. Some places charge interest on overdue accounts. In a whole host of ways, once you are in the hole, it is very hard to climb out. Many of us will get into the hole, and some will come out, while others will be stuck there.
What we are seeing is the beginning of the end of many American’s relationship to public utilities. As the costs of food and gasoline rise, and as benefits disappear and medical costs overwhelm many families, people are about to come hard against the costs of their fossil-fueled lifestyle.
At first, this will “just” be a problem for the poor, as is already happening — I’ve reported on the “Heat or Eat” crisis several times. But it isn’t just heat — that’s just one canary in the coal mine. The thing is, people struggling to get by tend to pay their bills in rotation, trying never to get far enough behind on any one bill to have a crisis. But that kind of juggling is often disrupted — unforeseen expenses always arise — and often there’s a cascade effect, since all the bills are increasingly large and somewhat overdue … It doesn’t take much to lose heat and power and gas.
If you listen to the news reports, it sounds as though the economy is stabilizing, like we’re near the bottom. Don’t worry, we’re told. But it is worth noting that almost everything that we’re seeing now represents, at one level or another, the selling off of things that have in the past had value, often at very low prices.
Last year, I suggested that the new economy was going to based on bottom feeding — scavenging off the leavings of our prior wealth. I see nothing in the news reports that suggests I was wrong — both the highest levels of finance and the lowest are showing the same things — the repackaging of increasingly worthless assets for sale at pennies on the dollar. There are already reports coming in of people stripping their attics of prized possessions and selling off anything they have, just to pay for basic bills. The metals in our pipes are already worth more than the houses, in many cases. Pawn shops are doing a booming business.
It seems mostly as though the economy is staggering along, but whether you are repackaging worthless commercial assets, worthless luxury vehicles or worthless TVs, they all add up to … worthless, in the most literal sense. The days of keeping the bills paid this way are numbered. The days of home equity loans are pretty much over, as almost half of recent home buyers now have no or negative equity, and whole regions (such as Las Vegas) have lost their access to home equity. There’s simply nothing left — and when there’s nothing left and the money doesn’t meet the end of the month, off go the lights, and the heat, and the gas.
For now, it is mostly the working poor leading the way. But it won’t stay that way. Most Americans live beyond their means — statistically, we spend about 5 percent more than we make. Middle-class Americans aren’t going to be able to absorb the vastly increased food bill, the heating bill, the electric bill, gas bill, the mortgage that isn’t worth much… something will have to give.
Fuel subsidy programs are already stretched — and a winter’s worth of fuel subsidies available to any low income household is good for about three weeks of heating at these prices. Many of us are about to face the reality that we’re not really all that middle class.
As more and more of us can’t afford our relationship with our utility companies, we’re going to break up like we’re on a bad date. And since there’s no money in the budget for the mass reinsulation of 90 million homes, or the subsidizing of fuel and electricity on the scale that Americans use it, we have two choices. We can break up with our utility companies only when we’re massively indebted and when we’ve already sacrificed dinner and home and other security to try to keep the lights on and the heat running, or we can do it wisely, and break up before the crisis gets acute.
That means adapting our homes to live without them. It isn’t easy — but for the $2,000 I spent on oil, many people could get the basic framework of non-electric living in place. And we could subsidize these things just as we subsidize solar or wind power — instead of giving people tax breaks for buying PV panels, we could give them tax breaks for buying things to enable them to live without them. Because while PV is great, it is demonstrably far too expensive for anyone struggling to pay their utility bills — and a lot of people who aren’t.
Two thousand bucks will get you a wood, corn or pellet stove, two solar powered battery chargers and batteries for flashlights and table lamps, and for your CD player or iPod. It’ll get you cardboard and tinfoil enough to make a solar oven for warm weather, and you can put stew on the back of the stove in winter. Depending on the size of your house and your needs, you might have enough left over for long johns, or a couple of personal battery powered fans. It isn’t ideal, but you’ll have light, heat, and food.
Another $40 will get you a tiny washer that you can do easily by hand, but a bucket and plunger will do. If you don’t have water, you’ll need money for a well pump, a cistern, lots of rain barrels, or some other water solution — and this will probably cost more. But maybe if money is tight, you can work on making the water solution collective — most places around the world have central water, and everyone walks over, chats at the well, and carries their jugs back.
Is $2,000 out of the question? Well, how about $300 in long johns, battery chargers, down comforters, and a few small electric appliances — a tiny efficient space heater to take the edge off of the room you are in and a microwave to ensure copious hot tea? You can live without heating or cooling — no one has to freeze or die of heat stroke. The simple fact is that we’re not going to be able to afford even these preparations once we get further and further in debt to the purveyors of fossil fuels — the abrupt transfer to the low energy lifestyle, without any preparation, is what I’d like to see everyone avoid.
There may or may not be imported heating oil, or Canadian natural gas and American coal-fired electric coming into your house. Your utilities company may or may not still be in business. But what is almost certain is that the present trajectory means that more and more of us are going to have to reconsider our usage — and many of us aren’t going to be using any at all.
Originally posted at www.sharonastyk.com.