Energy prices have been going easy on buyers lately. And the trend could continue, according to the latest Purchasing survey of buyers. Only 28% of those polled say they expect energy prices to rise in the next three months, and only 3% say they expect to increase their energy buying.

The weak demand reflected in that last statistic has been around awhile and caused crude oil prices to start dropping in the second half of last year, from about $110/barrel in mid 2008 to $89/barrel at the end of the year. The first quarter of this year saw average prices of $42/barrel.

Coal prices are heading down too, according to IHS Global Insight Analyst John Mothersole. He says transaction prices could decline 20% as the industry retools to accommodate reduced demand. Coal is the primary source of electricity in the U.S.

And prices for natural gas, also used to produce electric power, have dropped along with decreasing demand.

But demand for all these energy sources is likely to grow as the world economy recovers. And, as buyers ponder how to plan for savings when prices begin to rise again, politicians in Washington will be debating the Obama Administration's proposed cap and trade program to reduce the carbon dioxide emissions from power plants and other sources.

Cap and trade is one of the intersections where Green purchasing and energy purchasing meet. It is one of the more contentious issues in the energy debate, and it could affect what you pay for energy. So what is it? John Hoekstra, manager of sustainability at Summit Energy, says it's a market-based way to cut greenhouse gas, or carbon emissions. "You add up all carbon emissions and then cap that inventory and ratchet it down over time," he says. Entities such as utilities would only be able to emit a certain level of carbon dioxide. To emit anything above that level, they would have to buy credits through a variety of sources, potentially including a government-organized auction. If they emit less than their cap, they could sell their credits on the market.

"The system should reduce emissions because the supply of credits will shrink and the price will rise," Hoekstra says. "Companies will decide if it's cheaper to reduce emissions through capital expenditures, or continue to buy credits."

Energy buyers will be at the center of cap and trade if the system becomes law. Hoekstra says that among the key facts they will have to know are: their carbon footprint--the amount of their greenhouse gas emissions; the cost of carbon credits; and how to manage market risks with a structured risk-management plan, just as they might hedge natural gas and electricity.

Casey Ragsdale, president of the Mobius Risk Group, adds that the key, like so much else in purchasing, is to know your objectives, know your risk tolerance and have a plan. And, of course, that knowledge and planning come only after you've established good communications throughout the organization, from the corporate suite, to manufacturing to sales. For example, the sales organization's revenue projections will help you determine whether you should be trying to lock in energy prices for a long time, or buy on a spot basis. Once again, internal collaboration and communications skills emerge as among the most important skills purchasing professionals can have.

You will find a list of information resources on cap and trade provided by Ragsdale at www.purchasing.com/risk .

pteague@reedbusiness.com

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