Are you prepared for an oil shock?
Yesterday I was writing a piece on major problems in the oil industry for The Sustainability Forum (it should go up today or tomorrow it’s here). I was listing the various problems – the price hitting $108 a barrel, oil companies fleeing Libya, the IEA saying the price of oil was hitting global recovery etc, etc. This on top of the wikileaks revelation that Saudi oil reserves had been overstated by 40%, the BP oil spill, continuing debate about the onset of peak oil and suggestions that coal may stay so cheap for long.
What is pertinent for this blog is how should individual companies respond?
The first questions to ask concern your exposure. Are you dependent on logistics, business travel or commodities from overseas? Do you use oil based raw materials? Are you an energy intensive business? If oil prices stay above $100 a barrel, how does that affect the your long term viability? What about $150?
Once you have an idea of the risk, you can look for solutions: eg avoiding travel through teleworking, sourcing local or bio-based raw materials, alternatively fuelled vehicles, more efficient vehicles, smarter distribution and route planning, backloading of freight vehicles, eco-driving lessons for drivers, swapping to sea and/or train and electronic distribution (eg MP3s).
Don’t stick your head in the sand here – even if a huge new source of cheap oil is found, most of the measures above will still cut your cost base, making you more competitive. You really can’t lose.