Racine Journal Times, WorkLife Section, August 17, 2008

Be well, Mr. Bee

I did something the other day that I’ve never done before.  I saved the life of an insect which found its way inside my home:  a bumblebee.  Instead of raging my usual war against insect invaders, with my weapon of choice being the electrified tennis racket gizmo, I took the time to gently coax Mr. Bee into a drinking glass in order to free him, unharmed, near my back patio.

Why my change of heart?  This little guy has been visiting my begonias, strawberries, tomatoes and a host of flowering plants around my yard all spring and summer, and he’s done a fabulous job.  Also, I recently learned that some of his friends and family are suffering from what scientists have labeled habitat destruction.  Eliminating him could mean that I’m eliminating the hand that is joyously helping to feed my family and beautify my yard, and there may not be too many of his brethren around to take his place.

Live and let live.  What a concept.

The older I get, the more I realize that the little things we do over our lifetimes, both individually and collectively, can have an enormous impact on our environment, which invariably comes back to affect us.  But it’s difficult to see that “what goes around comes around” because of the time lag between action and consequence.

We can’t see the immediate effects of idling our cars unnecessarily, an extra five minutes in the shower, tossing recyclables in the regular trash, setting the thermostat a few degrees lower in the summer and a few degrees higher in the winter.  But we are unique creatures on Planet Earth because we have the ability to step outside ourselves and invoke our imaginations.

I shudder when I imagine a world without flowers or vine-ripened tomatoes.  Hence, Mr. Bee’s continued existence.  Helping him help me live a better life seems logical, but my realization of such required me to stop for a moment and ponder our symbiotic relationship.  I made a conscious decision about something that seems so insignificant, simply by imagining a less desirable alternative.

Our imaginations are also powerful when contemplating a more desirable outcome.  I’m pretty sure that my world is better without flies and mosquitoes, so they will not fare as well as Mr. Bee.  But who really knows if such pests (yuck) don’t serve some far-out, unimaginable purpose?  Ecosystems are simple, yet complex.  Eliminate something little and it could mean the difference between a harmonious system we all know and love and the twilight zone.

Economies are no different.  Oil and gas prices have been rising for years, but we hit a tipping point this year when oil hit $140 per barrel and gas hit $4 per gallon.

Why did the price of energy – almost across the board – rise so much and so fast? The simple answer is an imbalance between supply and demand.  Just like water finds its own level, prices adjust according to the balance between supply and demand.  Based on population, we Americans are responsible for a disproportionate amount of the world’s demand for energy, and our appetite only increased as energy prices fell during the ‘80s and ‘90s.  But lower prices had the opposite effect on the other side of the equation:  supply.

It takes a lot of capital, time and effort to bring more energy supply to market.  But more importantly, it takes confidence in and optimism for future profits.  It’s only logical that oil companies wouldn’t be too keen on increasing supply while oil prices were steadily falling – especially if it meant negative returns on new projects.

So take our increasing demand for energy, throw in some more demand from the emerging, rapidly-growing economies of the world, add insufficient supply, and voila, you get higher prices.

What can we do about it?  First, don’t blame the usual suspects – speculators, pension and hedge funds – as their impact on prices was minimal in the grand scheme of things.  The forces behind the run up in prices, like a volcano brewing and simmering many years before an eruption, was years in the making and there were millions of people who unwittingly played a role in it.

Second, recognize that our increasing appetite for energy is oftentimes born from unconscious decisions about how we use energy, and even a small decrease in demand will help slow down or reverse the upward trend in prices, which is already happening as of this writing.  Third, be wary of political rhetoric designed to play on your emotions rather than your intellect and do your own homework on this issue.  For example, those who have suggested an excess profits tax on energy companies are blind to the fact that they would only sap capital (and incentive) away from new projects that would bring more supply to market, which leads to downward pressure on prices.

Finally, if you’re hoping that energy prices will fall back to where they were, be careful of what you wish for because that may send us back into a state of complacency.  We’ve been given a monumental wake-up call, which is the best thing to induce consumers, businesses and government to reduce their energy demand, seek alternative fuel sources, favor energy-efficient products and develop solutions for this long-range problem.

With our economy and ecosystems in better balance, Mr. Bee might convince his friends and family that it’s safe to return and give us helping hand.  Let’s hope so, for without him, we may have to swallow escalating inflation for another necessity:  food.

Michelle Ouzounian, CMFC, is the founder and President of Verity Investment Counsel, Inc. (www.verityinvcounsel.com), a fee-only, independent registered investment advisory firm in Racine. Michelle can be reached at 262-898-8400, or m.ouzounian@verityinvcounsel.com.

______________________________________________________________________

This article contains the opinions of the author, but not necessarily those of Verity Investment Counsel, Inc.  Such opinions are subject to change without notice.  This article is provided for educational purposes only.  The information contained herein does not suggest or imply and should not be construed, in any manner, a guarantee of future performance and/or investment advice.  Information contained in this article was obtained from sources believed to be reliable, but not guaranteed.  No part of this article may be reproduced in any form, or referred to in any other publication, without express written permission of Verity Investment Counsel, Inc.