January 2019 /
If you want a happy ending, that depends, of course, on where you stop your story.
— Orson Welles
In the world of New York City diesel-based heating oil, the story for No. 6 residual oil came to an end in 2015, while No. 4 oil will be eliminated by 2030. With that looming timetable it is surprising to learn that as many as one-third of all New York buildings are still using No. 4 oil for heat. The kissing cousin to heating oil is natural gas, which some NYC buildings utilize, while others can only burn oil, and a third category can use both. But because natural gas is a commodity and subject to all the constraints of the commodities markets, Con Edison and National Grid created a system of interruptible accounts to ensure fair distribution of the commodity in times of stress. They accomplished this by creating accounts which compel the building owner to switch from gas to oil, and they also created dual fuel accounts where the building owner must use specified amounts of natural gas and heating oil.
Of course the two utilities are in business to make money for their shareholders, but they need to offer prospects some incentives for signing with them. Arguably, the most explicit benefits are that the prospect pays a cheaper rate when no interruption occurs, and simultaneously can switch to a cheaper fuel if the utility’s costs go through the roof. Of note to building owners looking to sell, IT/dual rate classes attain better scores than oil-heated buildings as their use of energy per square foot reportedly declines. But you still have the specter of natural gas shortages. If Con Edison or Natural Grid calls an interruption, the customer must switch to the alternate source within a tight timeframe or run the risk of paying usurious rates for the natural gas used. Note here that dual fuel accounts are not obligated to participate in interruptions, and if they do so mistakenly they may wind up paying a higher cost using the oil.
At the end of the day, choosing between interruptible gas and dual fuel isn’t an easy analysis. Historically, gas may run 30 percent below the cost of oil, making the case for the benefits of gas heating. But since the future is random and unknowable, these hypotheses should all be approached with a strong measure of skepticism.
At this point I need to mention the futurist philosopher, Yuval Noah Harari. Commodities are old economy, while Harari looks at the new economy and worries that Silicon Valley weakens democracy and may make voting obsolete. Harari posits that Silicon Valley is manufacturing a tiny ruling class overseeing a resentful and teeming “useless class.” Silicon Valley is not optimistic on the future of democracy, says Harari. He believes that rank-and-file coders are skeptical about regulation and admit to a fascination with alternative forms of government. Harari points out that venture capitalists periodically call for California to secede. Of course, at the root of Harari’s philosophy is the startling thought that humans are animals and man’s dominance is an accident. Harari points to Aldous Huxley’s Brave New World, as an example of a tech-dominated world led by a regime of emotion control and limitless consumption. Even more daring, Harari went on to say that liberal maxims like “the customer is always right” are irrelevant in this new age of artificial intelligence. He believes that humans are hackable animals—after all, how do you live if you realize that the next thought that emerges could be the result of an algorithm that knows you better than you yourself.
I’ve taken the time to go through some of Harari’s musings because his is a cautionary tale showing that our democracy can not only be sabotaged by a clownish outsider, but also by a trusted Silicon Valley insider. This also has serious implications for building ownership and management.
Changes to real estate practices will come fast and furious and from all directions.
United Metro Energy Corporation
P: 718-389-5800 ext. 191