Posts Tagged ‘energy consultant’

2 May 20 2010 @ 10:35am by Matt Smith in Economy, energy consulting, Global Energy, risk management, Risk Strategy

Commodityspeak Through the Medium of Shakespeare.

To tie in with the shindig that is the launch party of our UK office at Shakespeare’s Globe Theatre on June 15th, I present to thee forthwith ten quotes Billy the Bard would say if he were involved in commodity risk management:

1) There is nothing either good or bad; but thinking makes it so – yes, markets are driven by various forces passing the parcel, from fundamentals to technical analysis to outside influences. But sentiment, opinion and fear/greed also play a starring role. So even if something is not in bad shape, if the consensus makes it so, then prices will reflect this.

2) Measure for Measure – a measured approach to mitigating risk is the way forward, and ties directly to my haiku on risk management: uncertainty is…..an ever-present threat so….hedge hedge hedge hedge hedge.

3) Chaos is come again – Othello knew where it was at…crude down 23% in 13 unlucky trading days, from top of the pops (high of the year $87.15 on May 3rd) to the drop of all drops ($66.91 today – May 20th).

4) Better three hours too soon than a minute too late – hedging is not about picking the bottom of the market, it is about mitigating risk.

5) Though this be madness, yet there is method in’t – why it makes sense to quantify risk in commodity markets. Although no-one can perfectly predict the future, by equipping yourself with a Batman-like utility belt of tools for assessing the potential evolution and volatility of a market – from macroeconomic or econometric models to Value-at-Risk to technical analysis – you can establish parameters to quantify present and future risk and reward.

6) Foregone conclusion – Pah! Shazbat! Unlike in Othello, there is no foregone conclusion in commodity markets. Which is probably a good thing too, as there would be no need for an energy consultant (= Unhooray!).

7) Screw your courage to the sticking-place, and we’ll not fail – having the knowledge to stand by your convictions on market opinions is key. And then develop, evolve, and expand on this opinion by using research, analysis, facts, and cement.

8) The winter of our discontent – no thank you, we have already been through this – no need for a sequel.

9) When shall we three meet again? – the witches from Macbeth are always good for a quote, even without mentioning hubbling and bubbling, toil and troubling. There’s many clichés to describe this – a rising tide lifts all boats, in times of crises all markets correlate, etc, etc, – the point is, following commodities is about monitoring all assets – be it equities, bonds or currencies, as they all influence each other, and can provide insight into the short-term movement in another.

10) By the pricking of my thumb, something wicked this way comes – two words for you – hurricane season. This year is predicted to be one of the most active seasons for years based on some key factors. That said, some say a trained chimp can predict hurricanes better than NOAA.

If you wish to attend the UK event, please click on the ‘Much Ado..’ picture at the top of the post.

I bid thee farewell.

2 Jan 28 2010 @ 10:15am by Matt Smith in energy consulting

Five and a half facts and four and a half fallacies to lower your company’s energy costs.

Here are ten simple ways for an industrial company to lower their energy costs:

1) Energy demand management: reduce your energy bills, but not your energy consumption. By being smarter about when you use energy (i.e. moving energy usage to off-peak times), you can potentially create huge savings.

2) Having twenty employees rubbing their feet on the carpet for one hour to create static can increase the temperature in an average-sized boardroom by 1.5 degrees.

3) Be nice to your boiler. Government regulations require boilers to be inspected each year, but inspection does not mean calibration. Going the extra step and calibrating your boiler can save thousands.

4) Install highly sensitive motion sensors in breakrooms, restrooms, corridors and stairwells. Not only will this conserve energy, it will also keep employees warm due to having to wave their arms around like a crazy person. (A nice little side benefit - turn all thermostats down by 2.5 degrees).

5) Understand your energy charges. If you receive service through your utility, make sure you are being charged the correct tariff rate. If you receive service from a third party supplier, attempt to negotiate a lower rate.

6) Purchase Energy Star products where possible. A collection of three or more Energy Star products means you can apply for an additional bonus tax rebate called the Energy Constellation Cashback Rebate.

7) For a plant / factory, buy electrical-driven machinery rather than compressed air-driven. Cut down on compressed air usage wherever possible. The misconception with compressed air is that it is free (the air is free, compression is not). In effect, 92% of the energy used to power compressed air machinery is lost through transmission. The moral of the story – go for electrical-driven machinery.

8) If you lower your thermostat by one degree a week starting on October 1, employees gradually acclimatize to an ever-dropping temperature. By January 1, their movement may be restricted due to too many layers, at which point you crank up the heat again. By one degree a week. Estimated savings on a 3000 square foot building: $1359. ($59 for the Christmas party kitty, $1,300 to the bottom line).

9) Have your plant undergo an energy audit or a consumption workshop (where your team can be taught how to assess their own energy audit).

10) Adjust the brightness on your monitors lower by 80%. Not only will this save energy, but the darker tone will place less stress on your eyes, which means less vision insurance claims for your company (approximated savings of $843 per 100 employees).  

0 Jan 21 2010 @ 10:55am by Matt Smith in Capital Markets, energy consulting, Natural Gas, risk management, Risk Strategy

What’s the worst that can happen?

bang!‘A cynic is a man who, when he smells flowers, looks round for a coffin’ – HL Mencken

There is nothing wrong with being cynical, and there is nothing wrong with preparing for the worst. And it shouldn’t be a surprise to see this written by someone in risk management; after all, we spend more time assessing downside risk than a professional bungee jumper. 

One of the key drivers of energy risk management, or of risk management of any kind for that matter, is to mitigate risk.  But how do you quantify risk? And why? Lacking a better way to quantify the unquantifiable, a rather unhiply-named gent called Eugene Fama coined the empirical measurement for risk – volatility.

Accurately and consistently quantifying risk (or volatility) in commodity markets is as easy as doing a cartwheel underwater (impossible – just try it), as the extreme movements in natural gas from $13.69 to $2.40 in little more than a year, so dramatically proves. But by equipping yourself with a Batman-like utility belt natureof tools for assessing the potential evolution and volatility of a market - from macroeconomic models and Value at Risk (VaR) to technical analysis - means you can come up with a plan with which you are comfortable. And this plan will be guided by your own tolerance - i.e.  how much risk/reward you are willing to and able to accept when taking a position (or not)  in a market.

So back to the original question: what’s the worst that can happen? The simple answer is we don’t know, because no-one is able to exactly predict the future. But if you have a robust enough risk strategy in place that prepares you adequately for the worst, it doesn’t matter as much what the worst-case scenario will ultimately be; you will be in a strong enough position to defend against whatever the market may throw at you.