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Hawaiian Electric Co. has launched a media campaign to explain to residents why their electricity bills have remained at record highs for months.
In television commercials, Robbie Alm, HECO’s executive vice president, says that the tsunami in Japan is the main cause.
In a clip posted on the electric utility’s website, Alm says:
It’s complex, but the main reason is in the wake of that devastating tsunami nuclear energy has largely been replaced by oil, sending oil prices in the Asia-Pacific region skyrocketing — and these prices aren’t coming down anytime soon.
Here’s the video:
In Hawaii, the majority of electricity generation is derived from oil, and residents are used to volatile prices, but this is something different, according to Alm.
“With historic trends, the price spikes up and equally spikes down,” he told Civil Beat. “This is really the first time we’re talking about close to a year of sustained high prices. It’s like we’re in a different situation and that’s why we felt that we should tell customers.”
Since 2010, monthly electric bills have risen by 50 percent.
Unrest in the Middle East and northern Africa sent oil prices climbing early last year. But prices for benchmark crude, such as West Texas Intermediate and Brent, which generally correlate with oil prices, began falling in May. In Hawaii, this hasn’t been the case.
Alm said that Hawaii prices follow those in the Asia-Pacific region.
He referred Civil Beat to Fereidun Fesharaki, an international oil export and senior fellow at the East-West Center, to verify the claim.
Civil Beat spoke to Fesharaki, as well as other experts, and reviewed data from the International Energy Agency.
Gail Tverberg, a consultant on oil issues and editor of the OilDrum.com, told Civil Beat that Japan had been importing more fuel oil for electricity generation, leading to increased competition and higher prices.
“Regarding the situation with the Fukushima tsunami, what has happened is that quite a bit of Japan’s nuclear generating capacity has been taken off line,” she said by email. “Since they are an island like Hawaii, they also have problems with obtaining enough fuel for electricity.
“To the extent that they are buying residual fuel oil and Hawaii is also, the two areas are competing for the same fuel. Their extra demand in the market place would tend to help keep prices up (or raise them further).”
The latest data from the International Energy Agency, shows that Japanese fuel imports were about 50 percent higher in September 2011 than September 2010.
Fesharaki said that Alm was correct in saying that the Japanese tsunami is the main cause of Hawaii’s high rates. He said that Hawaii’s prices are tied to those in Asia, not the mainland U.S.
“For practical purposes, Hawaii is not in the U.S., Hawaii is in Asia,” he said. “Looking to Oklahoma or Arizona is really stupid.”
He provided data that shows oil prices in Japan and Hawaii have a 95 percent correlation rate. While benchmark oil prices have declined since last spring, the prices in Japan and Hawaii have shot up. (While the data only goes through September, there’s a two- to three-month delay before the prices impact electric bills.)
Richard Parry, CEO of Aloha Petroleum, also agreed that the tsunami had raised local electricity bills.
“HECO buys a lot of low sulfur fuel oil and primarily buys low sulfur oil from local refineries that have prices that are indeed tied into the Far East prices,” he said. “So the Asian low sulfur fuel oil prices have been really affected by what has happened with the Japanese tsunami and the closing down of nuclear power plants. The Japanese have had to switch to running fuel oil.”
Alm also claims “that these prices aren’t coming down anytime soon.”
Tverberg concurred. She said that Japan didn’t have near-term plans to put its nuclear generating units back online.
“It won’t go away, unless Japan restarts its nuclear units, so it is a long-term problem.”
The bottom line: Hawaii’s oil prices have remained at record highs primarily because the Japanese tsunami knocked out nuclear power plants and forced the country to use oil for electric generation. That situation is unlikely to change in the near future.
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