ADE Director's Communication Memo Form

Memo Number : COM-06-012

Date Created : 08/16/2005


Co-op Directors

Type of Memo: Informational
Response Required: No
Section:   Central Administration - Dr. Donald M. Stewart, Deputy Commissioner
Energy Costs

Regulatory Authority:

Contact Person:
Dave Floyd

Phone Number:


Crude oil prices are setting new records almost weekly. In April the record high was $58 a barrel and now four months later the price is over $67 (an average increase of 4% per month). This follows dramatic price increases for natural gas. From January 2000 to June 2003, wholesale natural gas prices have increased an average of 7% per month. From January 2004 to January 2005, natural gas prices jumped another 50% and as natural gas prices increase, so does the price of propane. Recent reports suggest another 20% increase in natural gas and propane prices this coming winter. It is also important to note that some electric generation facilities are powered by natural gas. Because of increased transportation costs, coal-fired generation plants are also experiencing higher operating costs. So, the cost of electricity is also going up.
Where and when this will end no one knows for sure, but most experts agree that the cost of energy will not be going down. Crude oil futures are trading over $60 per barrel every month through 2006. Schools should consider all possible improvements that would save on energy consumption, from installing more efficient heating, ventilation and air-conditioning (HVAC) equipment to making buildings more weather tight. Many of the improvements made now will pay for themselves over the typical lifecycle of the improvements.

According to the U.S. Department of Energy, natural gas prices in Arkansas have increased an average of 12.5% annually over the past ten years (with most of the increases coming since 2000). At a conservative 8% annual inflation rate for natural gas, every dollar saved this year will cut operating expenses by about $80 over the next 25 years. Imagine the long-term savings if a school district could reduce natural costs by $100,000 this year.


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