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Facing an Energy Crisis

As I write this column, the futures market for a barrel of crude oil is expected to top $100, surpassing the $95 inflation-adjusted cost in 1980. In 1999, oil futures hit a low price of $11, but have steadily increased since then – in fact, there has been a three-fold increase in the last four years.

Americans will mostly feel this price increase at the gas pumps and when their heating bills arrive this winter. With fuel currently hovering around $3 per gallon, another increase will have many seeing red – literally and figuratively.

But the effects of high oil prices will be great on fresh-cut processors and the produce industry as a whole. The chemicals that protect and nourish the crops are created with petrochemical inputs, as are the tanks and hoses that hold and spray the chemicals. Trucks that ship produce from the West Coast to the East Coast require a lot of diesel, and everything from the tires to the greases and lubes are made from petroleum. And those inputs are part of the reason that demand for oil doesn’t drop in direct correlation to the price of oil.

America has seen oil prices spike before, but not all the lessons learned at the time stuck. The 1973 energy crisis, the result of an OPEC oil embargo, damaged business and consumer pocketbooks. New York Stock Exchange shares lost almost $100 billion in value and the price of gasoline quadrupled – if there was any available to buy.

Government responded to the crisis by instituting 55 mile per hour speed limits and daylights savings time, creating a Department of Energy, strategic petroleum reserves and Corporate Average Fuel Economy standards.

An energy crisis again occurred in 1979 following a revolution in Iran. The price of a barrel of oil set a record that wasn’t broken (in real dollars) until last year. Even government felt the crunch with President Carter responding by installing solar panels on the White House and adding a wood-burning stove.

But even as the country faces another round of high oil and input prices, there are many groups standing in the way of breaking our dependence on oil. U.S. and foreign automakers have opposed an increase in the CAFÉ standards, while at the same time investing in hybrid-electric, electric and hydrogen fuel sources. Communities and animal rights groups have fought the installation of wind-powered generators that would add free, clean power to the energy grid.

The potato industry should be used to dealing with dwindling resources by now. Most of what is used on the farm uses petroleum in some way, from chemicals to equipment. Some shippers are now using rail to transport produce, which also avoids the problem of driver shortages in the trucking industry. With the current climate, the decision to be energy efficient could pay off in sales as well. Many restaurants and retailers are concerned about the “carbon footprint” of their products, so being a good steward can make your potato products more desirable.

Reducing America’s dependence on oil can’t just rely on driving fewer miles or buying fuel-efficient vehicles, it will require a commitment from businesses large and small to develop alternative ways to produce products and fuels without petroleum – before the cost of inputs wipes away profits.

Originally posted Monday, Nov. 19, 2007

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