The price of insulation for energy conservation is moving up and this is only the beginning. With demand increasing, the handful of corporations who produce fiberglass insulation are about to reap large windfalls as they weep about their inability to expand supply accordingly. Three companies dominate the fiberglass industry. They are Owens-Corning Fiberglass, Johns-Manville, and Certain-Teed. Imports are insignificant because of the difficulty of economically transporting fiberglass. Other companies who may want to enter this booming market find heavy investment costs, technical know-how, and construction lead times difficult barriers to overcome. Also, by the time such factories are built the demand may have slacked off, leaving a price-depressing excess capacity.
An alternative home insulation material is cellulose, or put more plainly, used newspapers. To make this cellulose less vulnerable to fire, producers add a borax-based fire retardant powder to the mix. There are only three U.S. boirate producers with U.S. Borax being the industry giant. Although cellulose production could expand rapidly, that is not the case with borates.
The federal government is beginning to document these supply bottlenecks. At the Federal Trade Commission, the staff worries about consumers being gouged or discouraged from insulating their homes as the best short term solution to energy problems. Other insulation materials such as rock wool or foamed plastics are not expected to figure materially in relieving supply over the next few years. Besides, foam plastics present potential fire hazards.
Without significant substitutes for fiberglass and cellulose, the predictable price inflation will occur and some seller may try to stretch supplies by selling cellulose without adequate borate flame retardant. Poorly treated insulation for fire prevention purposes already has become an issue in Colorado and Massachusetts.
The concentrated nature of these two industries gives them a price increase power that raises antitrust issues. In 1975, the price of fiberglass insulation rose 18.5 per cent at the same time that the volume of shipments declined 5.1 per cent.
Chemical Week magazine reported in late June that a $22-a-ton increase will raise boric acid prices to $265 a ton this month. That amounts to a 32 per cent gain since 1975. As if to relieve the reader, the magazine added, “The new price, however, is well below the $600a-ton black market tab.”
The Schlesinger energy plan recommended a tax credit for homeowners insulating their homes. To stimulate consumer demand for insulation without recommending federal action to break these supply bottlenecks, which could drive the price of that insulation through the attic, is poor analysis that enriches the insulation oligopolists.
Quality control and fire prevention standards also were given little attention by the energy policymakers in Washington. The National Bureau of Standards (NBS) presently is studying fire hazards, moisture and material degradation. Thus far, the NBS performance has not been sufficiently aggressive in allocating a high priority and tighter time schedule to development of enforceable standards and testing methods. Time is truly of the essence if the nation wants to take advantage of the great potential of reducing energy waste.
It is bad enough for homeowners to be confronted with the spreading corporate practice of shouting “shortage” in order to claim more consumer dollars. It would be even worse for homeowners, having paid top dollar for the insulation, to be subjected to fires or, in the case of foamed plastics, toxic fumes.
The Federal Energy Administration’s (FEA) lack of homework needs quick correction. It may be up to the Federal Trade Commission (FTC) to provide FEA with the spur needed to become more farseeing and more consumer-sensitive. If FEA doesn’t move, it is even more likely that the administration will fall short of its goal to have 90 per cent of the nation’s homes adequately insulated by 1985.
For its part, the FTC needs to apply both its antitrust and consumer protection authority in as expeditious a manner as possible. It could start with a highly visible public information program before consumers are turned off on another energy recommendation that becomes an instrument for industrial greed.
Interested readers may wish to write to the Federal Trade Commission, Washington, DC 20580, to express their views or ask questions.