Blunting Katrina's Aftershocks Through Energy Conservation and Efficiency

September 2, 2005

Media Contact(s):

Steven Nadel , 202-507-4011, Executive Director

WASHINGTON, D.C. — Hurricane Katrina, in addition to causing massive destruction and human tragedy on the Gulf Coast, is creating aftershocks in energy markets that will affect most Americans for the coming months or longer. Early energy market trends include:

  • Gasoline prices spiking above $3, causing panic buying in several states. Heating oil prices have already reached $2.50 per gallon in some areas. Surging wholesale prices indicate further increases are coming.
  • One-quarter of the nation's oil production and 10% of its refinery capacity will be offline for at least several weeks.
  • Major oil pipelines shut down at least temporarily.
  • Natural gas wholesale prices for the winter season are hitting new record highs at greater than $12 per thousand cubic feet, more than five times 1990s levels.
  • Coal prices are up due to increased demand from power generators and railroad problems on western shipping lines.
  • Electricity prices, driven by high gas and rising coal prices, are likely to increase as utilities pass on fuel prices.

In short, all of our energy markets are under greater pressure than they have seen in 25 years. Combined with Katrina's other effects on the economy—like shut-down shipping, industrial production, and rail operations, these energy trends could create major economic setbacks, both for individual families struggling to pay high energy bills and for the economy's overall health.

"Katrina has turned tight energy markets into a potential national energy crisis," said Steven Nadel, American Council for an Energy-Efficient Economy's (ACEEE) Executive Director. "We need energy conservation and efficiency now to keep the crisis from exploding, and new efficiency policies and investments in the longer term to get the economy back on track and keep such crises from recurring."

Energy conservation in the short run, and energy efficiency investments in the longer term, should be an essential part of the Katrina recovery effort. ACEEE research has shown that small energy savings in such tight markets can lead to major drops in energy prices. To blunt the effects of energy market disruptions and keep prices from spiraling out of control over the next several weeks, ACEEE recommends the following emergency efforts:

  1. The President, leaders of Congress, governors, and other elected officials, plus the leaders of the energy industry, should mount a concerted campaign (as authorized in the energy bill the President signed in August) to urge and assist the American people to use energy more wisely in the near term and invest in energy efficiency for the longer term.
  2. Congress should pass an emergency spending measure for Katrina and energy price relief, which should include increased low-income energy assistance and weatherization funding, the expansion of our best efficiency deployment programs such as ENERGY STAR, and special funding to help the Gulf states rebuild efficiently.
  3. All Americans should take simple steps to reduce energy use, such as:
    • Driving more slowly—cutting highway speeds from 65 to 55 squeezes over 10% more miles from a gallon of gasoline.
    • Inflating tires to recommended pressures can improve fuel economy by 2% or more.
    • Using premium synthetic engine oils can boost mileage.
    • Combining trips and driving the most fuel-efficient vehicle in the household will cut fuel costs.
    • Walking, biking, carpooling, and taking public transit when possible will further ease the pain at the pump.
    • Winterizing your home with caulking and weatherstripping, having your heating system tuned up, cleaning or replacing your furnace filters, sealing leaks in air ducts and attics, adding insulation, and installing programmable thermostats.

A more detailed list of consumer energy savings options is available at http://www.aceee.org/Consumer/consumer.htm.

For the longer term, the federal government should set policies to accelerate the overall rate of energy efficiency improvement. Key priorities for the federal government include:

  • Extending and broadening the recently enacted tax incentives for efficient technologies
  • Setting national energy savings targets for oil, electricity, and natural gas
  • Improving automotive fuel economy initially to 30 mpg and ultimately to 40 mpg
  • Ramping up research and deployment funding for energy-efficient technologies

Consumers and businesses should:

  • Take advantage of the federal tax incentives for new homes, commercial buildings, home retrofits, and equipment replacement that will become available in 2006.
  • Contact your local utility and state energy offices for efficiency information and programs they may offer.
  • Buy the most energy-efficient vehicle, appliance, or heating or cooling system that meets your needs and fits your budget. Choose ENERGY STAR products where available, and also look for the most efficient products at http://www.aceee.org/consumer and the most efficient vehicles at http://www.greenercars.org

"This is not just about gasoline prices," said Bill Prindle, ACEEE's Deputy Director. "Our energy markets are linked, so we need to use all our energy sources more wisely. There is no silver bullet to solve our current energy problems: we need to use conservation and efficiency as first-responders while we rebuild our supply systems. If each of us does our bit to save energy, it will avoid a lot of pain for everyone. We are all in this together."