Listen to this column in your favorite format

iTunes or MP3

The first energy crisis occurred during the autumn after I graduated from college in 1973. Little did I know it at the time, but this event put an underlying theme in my entire career, at least to this point in time.

That being said, I can't recall a fall in the last forty-five years where, if charged with putting together next year's energy budget, let alone a five year plan, would I be more at a loss as to what to say.

We'll start with the war against coal and the climate change conference in Paris. Not likely to drastically affect mills in 2016, these matters may, however, set in motion plans that will commence in the next twelve months. Such plans may incorporate turbine and boiler inspections in coal-fired power houses. Will you do them, or will you not, since you are planning on phasing out these facilities in the next couple of years anyway? Should you delay these costly inspections and outages, knowing that these facilities will be phased out in the near future? I can't tell you--this depends on your corporate strategy and your insurance underwriter (and possibly on local codes).

****

Listen to industry news on Pulp & Paper Radio International!

****

Natural gas may be the easiest fuel source to predict. It is largely domestic (if you are in the United States) and, compared to past years, is remarkably stable at the moment. Electricity follows the coal plans and long term contracts are tough to sort out at this time.

Heaven help you, however, if you are charged with buying fuel for trucks, construction equipment and so forth. OPEC has abandoned all production limits (and we used to think those were bad!) as they strive to drive US fracking out of business. There is even talk of oil dropping to US$20 per barrel or less in the coming year.

So, what will you do? Surprisingly, conservation makes sense if you want predictability. We have been driving energy conservation since the aforementioned fall of 1973, but there is still room to go. Why do you want to push conservation if prices are low? After all, there is no return on investment at low prices, is there?

****

What happened? It's been an interesting month ... Check out the latest edition of Strategic & Financial Arguments.

****

The answer is a bit complex, but it goes like this. If you want to wring unpredictability out of your energy budget, you will push conservation no matter the price of your energy sources. Energy that you don't have to purchase (at any price) reflects energy costs that cannot destabilize your energy budget. It is as simple as that.

For our quiz this week, am I off base? Are you tearing your hair out trying to predict energy costs in 2016? Tell us about it here.

For safety this week, remember that handling any energy source incorrectly can cause an accident. You know this. Make sure it doesn't happen to you or your team.

Be safe and we will talk next week.

You can own your Nip Impressions Library by ordering "Raising EBITDA ... the lessons of Nip Impressions."