>> Coming up, summer is in full swing, but winter heating costs are already a concern.
We examine claims that we are facing a home heating crisis.
Despite the economy, one area businessman is celebrating his own success, having been inducted into the New York State Business Hall of fame.
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>> Rochester's news magazine since 1997.
This is "Need to Know."
>> Thank you for joining us.
Members of the New York State Assembly's Energy Committee have been traveling around the state this week.
Democrats are pushing a plan to send hundreds of millions of dollars residence pay their home heating bills and to help insulate their homes.
The committee chair stopped in Rochester.
>> The cost of home heating has gone up so astronomically that many people will not be able to afford to heat their homes this winter.
Let us be clear on what we are talking about here.
People will be choosing between food and fuel.
People will be choosing between the medicines that they need and the heat that they need.
This is not something that is limited to poor people.
More and more every single day, people are calling our office says.
They are calling our office is to let us know how they are going to make it this winter.
They do not know how they are going to afford a utility bill.
Oil has gone up more than 68% in the last year.
>> He was joined by the legislative director for the New York Public interest Research institute.
That group's backs the majority's plan to pay for the additional home heating assistance with a 2% gross receipts tax on crop -- on oil company earnings.
The question is, how do you pay for it?
The state has a fiscal problem.
It makes perfect sense to was that the oil companies pick up the tab.
They testified before Congress and said, it is not our print -- our fault.
It is the marketplace.
It is not our fault.
If that is true, they should be happy to make sure that they are made -- they are spending some of their profits to make sure that New Yorkers and Americans do not freeze this winter.
>> To help us bring these chilling forecasts into perspectives, we have Ben Ebenhack, a former petroleum engineer from big oil.
Right off the bat, you hear a politicians say crisis.
Are we looking at a crisis and a couple of months?
>> We could be.
Certainly, it is demonstrably true that the prices have increased.
I do not see any real likelihood of significant retraction of the prices ever.
In fact, I would argue that if there is a little drop in prices, a noticeable drop in prices would probably be the worst thing for our future -- our future possible.
It would be one more case of the little boy crying wolf and going back to the notion of it was just a bauble and we will have cheap energy for the future.
In the long run, that is not true.
>> They specifically mention oil up 68%.
Is it just oil customers that have to worry about the coming winter or our natural gas customers going to be impacted as well?
>> Everyone is going to be impacted.
Crude oil is the marker price commodity.
Energy prices tend to follow crude oil prices.
Natural gas will probably not be as impacted because natural gas, for one thing is more abundant in the United States.
We have more of it relatively speaking.
It is partly because natural gas was and was valued commodity for many years.
Oil companies called themselves oil companies because oil was their preferred commodity.
>> Maybe just 10 years ago, oil was cheaper than natural gas.
How come the flip?
>> Crude oil is a totally globally traded commodity.
We are seeing disruptions.
We are seeing a lot of speculation in the petroleum markets that relate to things like the disturbances in the Middle East, wars in the Middle East, concerns of growing demand -- growing demand in countries like China and India.
It could drive us into a shortage sooner rather than later.
A lot of the price we're seeing is speculation.
>> Explain to me, what is speculation?
>> Understand, this is an engineer's explanation.
As I observe, speculation is people speculate that prices will likely go up.
It is really what the stock market is all about.
With commodities like crude oil, we know that we are going to reach a global peak at some point.
So, speculation that we may be nearing that peak is pushing it.
>> OK.
The oil companies are making record profits because of this.
Is it a good idea to start taking some of that in the interest of the public like they are suggesting?
Does that to a short-term solution at the expense of a longer-term solution that might reduce oil prices?
>> I think it is a little of both.
Certainly, the profits are growing rapidly.
I still have some profit-sharing stock.
>> You are pretty comfortable right now.
>> I am pretty happy about that.
I wish I had held onto more of it.
I would say a majority of Americans have some of their investments in the big oil that we love to hate.
Those investments will be doing well for the most part for many years to come.
As prices go up, inevitably the tax that the companies pay goes up as well.
A fair amount of that is at floor of types of taxes -- ad valorum types of taxes.
To add a tax for a non discretionary use like home heating, I am a little ambivalent about.
On the one hand, I think consumers need to be seeing high prices.
We have not been valuing our energy.
We have been treating it as prodigal children treating their inheritance.
We have squandered.
I think that we really need to see those higher prices.
It is most important, in my opinion, that we see those and our most discretionary uses, which would primarily be our vehicular uses.
>> You can do something about it, whereas hall meeting -- home heating, you cannot do anything about that.
To get oil prices down, we need to get away from oil to create less demand?
>> I would still say that it would not bring oil prices down significantly.
We have to get used to the notion of paying for our energy.
I do not expect energy prices to go down.
I think even as alternative fuels become competitive, it will be partly because energy prices have risen dramatically.
There may be a leveling off and perhaps we will reach a plateau that has a slight decline.
I do not expect to live to see that.
>> This reset little drop in gas prices at the pump is not significant?
We will continue to see $4 and perhaps $5 and it will continue to go up?
>> In the big picture view, yes.
There will be fluctuations.
I think one of the dangerous things is that a fair amount of the price is speculation right now.
There is a possibility that if consumers and investors got feeling very optimistic, prices would fall.
Consumers would get optimistic about consuming.
>> What is the likelihood of this optimism?
>> I think increasingly less as time goes on.
I do not see peace breaking out in the Middle East, unfortunately any time soon.
I do not say the growing demand from China and India plateauing very rapidly.
Even if it were, there is another billion people in developing countries who ultimately aspire to the type of growth that India and China are seeing right now.
>> If there is no real solution that would bring down oil prices -- in the big picture, oil prices are going to be high.
Consumption needs to change.
It did change in the 1970's.
>> Absolutely.
We actually turned around the exponential growth curve and had a few% decline in the global energy demand.
It was really unprecedented.
I would argue it was largely because of price.
>> What kinds of things to people need to do to get enough Lord consumption that it shows up globally and it impacts this?
>> What of the pieces of good news is that American choices really can make an impact.
We are currently consuming a quarter of the world oil with 5% of the world's population.
About half of our oil is being consumed directly in the transportation sector.
With today's consumption levels, that is a 11 million barrels of oil today that we can consume in the transportation sector.
If we are delivered about minor things such as Senator Obama mentioned like inflating our tires, taking better care of our cars or bigger things like being more delivered about looking for vehicles with good fuel economy, trying to live closer to our workplace, and have less discretionary consumption actually could impact that and forestall the real crisis when we reach a peak.
>> You brought the Democratic side.
The Republican side, why not open up more of oil-field and drill more of our own?
>> As a petroleum engineer, I have a hard time not liking the idea of growing.
I think we need to keep some perspective on what we can expect from that.
Over time, we are probably -- personally, I think oil is going to be a valuable commodity for a least 200 years.
I think over time, we will probably be drilling in places we're not opening to drilling now.
I think it would be a mistake to do a carte blanche to drill anywhere, especially if the hope is to lower energy prices.
It will not work.
It will take time.
I was seeing on last night's news reports and reports of people's comments on the lead time getting shorter and shorter.
It is real.
It will take several years from the time that a new province is open for exploration before any oil can come out.
That will be a short-term impact.
The production from any given field reaches a peak and begins to decline in a few years normally.
>> Getting back to the 1970's were there was an impact can't Americans made some changes in how they consume fuel, was there legislation at that time that encouraged them to do so?
Was this something that people finally got that they had to do that in order to protect their own wallets?
>> I think it was some of each.
The Department of Energy was created during that time.
There were tax incentives for home insulation improvements and so on.
As I recall, they were a little bit more sweeping than what we have today.
There was a good deal of legislation trying to regulate how oil companies reported reserves, what kind of prices oil prices -- oil companies got four different kinds of oil.
There were some friend -- There were several different kinds of tiers of oil prices.
>> The government did do something fairly significant to reduce the prices.
>> I would argue that it did not actually -- -- did not actually achieve that.
>> We will have to say that discussion for another time.
Thank you very much.
Thank you Ben Ebenhack.
We will have a number of reports next week on WXXI AM 1370.
You contract for his latest report on our website.
Michael Mandina was once working on the floor of a small company founded in 1994.
Today, he is president of the company is one of only two businessmen inducted into the New York State Business Hall of fame this year.
He joins us now in the studio.
Welcome.
>> It is a pleasure to be here.
>> Before we get into the reason for your award, tell me a little bit about optimax systems.
>> It was humble beginnings in the basement of a barn.
It was your basic start up, founded on credit cards.
We have grown over the years.
That was in 1991.
We are currently at 116 employees.
We have 40,000 at stake -- 40,000 square feet.
>> Tell us a little bit about the product.
>> We are a precision optics manufacturer.
We have a number of precision McCain -- precision machine tools.
We -- we work with brittle materials.
I tell people that we are like a glorified machine shop.
We have very fine finishes and we work with materials by grinding them.
>> It is considered advanced manufacturing?
>> Very much so.
It is a very clean work environment.
Everything has to be controlled.
This type of industry, which I will talk about my activity with -- that kind of activity and all the hiring we have been going through in the last 17 years has been very difficult in terms of staffing.
>> You mean highly trained manufacturing employees?
>> Absolutely.
We have people dedicated to full-time training.
We have to train virtually all the employees who come in because it is a unique industry.
>> That leads us to why you received the award and why you are being inducted.
This problem is not yours alone.
There is a problem in the area of finding people capable of doing the skilled manufacturing that companies like yours are doing.
You helped found an organization.
Tell me about that.
>> The investment board had a skilled alliance workshop last year in which they brought together -- they selected advanced manufacturing as the topic they will create a -- a cluster around.
We did some brainstorming.
We've were facilitated through a process.
At the end of the process, it was time to decide whether we were going to do anything with all the work that we had done.
A couple of important companies, optimax being one -- I do not want to leave anyone out.
I did not leave my life -- I did not bring my list.
There are a number of fine companies that are enlightened and understand the need.
Certainly, the need is global.
The world has a need for technology and technicians.
Our region and believes that we are well-positioned to be one of the best technology centers in the world with the best work force that can draw companies here.
And there really is not a single entity that is helping to build and exploit that.
Fame is really built around this.
>> This is the program that you developed after that brainstorming session?
>> It is.
Ultimately, we named it.
We have a couple of companies.
We have a person working to facilitate and he people connected.
This has happened in less than one year.
It has been very active.
It is virtually like starting a new company, except it is not for profit.
The controls are a little looser than it would be in a for-profit enterprise.
It has been great fun.
It is finding a lot of acceptance and we are getting great enthusiastic welcomes from all of our stakeholders and a willingness to help.
>> This is a single entity that is leveraging the area's ability to train and produce skilled, technical workers.
>> Correct.
>> How are you going about that?
He said that you are starting small.
What are you doing?
>> Most of us have found that to have a job fair and to employ people who is only a Band-Aid solution for the moment.
That we end up hiring the same people.
It is not very affective long term.
The long-term strategy is increasing the number of people and potential employees in the pipeline.
We're working with high schools and middle schools to learn the value of science, technology, engineering, and math.
Parents understand the good paying jobs that there are in advanced manufacturing and all types of different disciplines -- if you look at the statistics on manufacturing, the number of manufacturing jobs have been reduced to 3% per year for the last 20 years.
Everyone will say manufacturing is dead and that it is going away.
I would say low-skilled, high-paying jobs are going away.
The high skilled, high-paying jobs are wanting for workers.
We do not have many students coming out of the pipeline.
There is the belief that there are not many people understanding that there is this.
>> Some of these are majors that parents and grandparents never heard of when they were going to college.
>> Exactly.
>> What are you doing right in the schools?
What will students and parents be seeing this fall?
>> First, I want to acknowledge the Rochester tool and machine program.
They have twentysomething high school students from the city school system going to a camp learning machine skills.
It will move right into jobs.
It is terrific.
And we want to do the same type of thing.
It is broader and it goes beyond just machinery.
One thing that we're doing right now that is exciting is that we are having -- we have worked with a local high school.
The technology teacher had an idea.
There are 26 middle schools on the east side of Rochester.
Only one of those goals was involved in an event called the first lego competition.
>> Getting kids excited about technology.
>> It is really a terrific event.
There is only one school doing it.
He said, how about I roll this out to the technology teachers and we can see how many schools would get interested?
We pay for the registration and provide mentors to this process.
I said, that sounds like a great idea.
We were enthusiastically received and we are involved in that process right now.
Clearly, we will not get 26 schools, but if we get six schools -- maybe next year, we will get a dozen.
And there is a new type of collaboration.
The region Roy has not had this before.
>> What counties are those?
>> Seneca, ontario, and wayne.
>> I know your company came out of an incubator at the University of Rochester many years ago.
I know you are trying to leverage the Rochester schools.
Are you working in conjunction with them at all at the college level?
>> What we find is we're being asked -- the mission is so appropriate for this region.
We are being asked to become involved in all nine counties.
We have already had an initial meeting.
So, we have had two meetings already.
>> So, it is building momentum?
>> Yes.
It has developed a critical mass and inertia on its own.
Even in spite of the part-time weak leadership that it has, it is being pulled because the demand is so great.
>> Thank you so much for coming in today.
Once again, congratulations.
Michael Mandina is one of the latest inductees in the business Hall of fame.
We will wrap up this edition of "Need to Know" with a reminder.
You can follow election 2008 with us by going to our website.
You will find a candidates guide her as well as extensive reporting from the wxxi Center pour public affairs option -- Center for Public affairs.
This is "Need to Know."
Have a great week.
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