World Oil Demand, Source: IEA
The U.S. economy is back on track. The Labor Department released March numbers that included adding 216,000 jobs beating the forecast of 193,000 jobs and reducing the unemployment rate to 8.8% from February’s 8.9% level. We all want greater declines but that doesn’t happen over night.
Having shown job growth the last several months, prognosticators have changed hats and are now worrying about the durability of the recovery. There is certainly enough to worry about too. Oil production coming from a suddenly volatile Middle East leads the concerns.
Transportation costs are escalating thanks to rising gas prices now approaching four dollars per gallon. Jet fuel, diesel and other liquid transportation fuels’ prices are tethered to gas prices since they all come out of the same barrel of petroleum — so do the costs of fertilizer, rubber, plastics and a lot more. Higher prices can easily raise the cost of most business inputs from travel to raw materials and that could choke off a recovery, so the concern is real.
Something you might not be aware of. According to the International Energy Agency’s homepage world oil supply is about two million barrels per day short of demand. High demand drives prices. Interestingly, world oil production has never reached the 90 million barrels per day (mb/d) now in demand. If the oil producers cannot fill that gap or if the gap widens — and demand will certainly escalate as the global economy recovers — we might see energy induced economic upheavals.
We saw the results of energy driven economic decline in the 1970’s largely driven by producers withholding product from the market. That’s not the case today as the producers are pumping all they can.
World Oil Supply, Source: IEA
Of course, we will need to wait and see how energy affects business. But unlike the 1970’s there are many new technologies, especially in the front office that will help blunt the impact of escalating travel costs to the SG&A line. This could all be relatively good news for the CRM community.
