Response to high energy prices

Posted by jd
June 21, 2005

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As we at iProceed had forecast (Previous article: Is recession on its way in 2005?), oil prices do not seem to stop from going up. While we have recently crossed $60 a barrel point, it appears that we may see further rise. According to the US government’s forecast, as shown below, oil prices have not only gone through the roof since 2000, they will remain at this level for quite some time.

A chart showing the rise in oil prices since 2000 and a comment that oil prices will remain around $60.

It is not necessary to repeat how high oil prices can throw any business model in disarray. There is no part of the economy that is left untouched by energy prices, and except for the energy value chain participant, it is detrimental to almost everyone. Just read how General Motors is in serious trouble now that not many people can afford large SUV’s.

What does it mean for you?

    Conduct a situation assessment in order to evaluate the impact on your business from every angle due to higher oil prices (e.g. raw material prices, lower disposable income for your customers, etc.)
    Develop a cost management program to respond to energy prices and implement it without waiting to see if prices will go down. Any cost cutting initiatives will improve the business in any case. Stay on top of energy prices by tracking the data.
    Employ hedging strategies to protect yourself against fluctuations.

Related articles

Taxes may have to be raised soon

Business forecasting is not a perfect science

Macroeconomics

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Comments
Trackback by Fast Cars on June 23, 2005 @ 2:48 am

Response To High Energy Prices

SUVs may be in for a major redesign as the cost of oil climbs….

Pingback by iProceed - Better Strategy, Better Business » High energy prices may derail economy on June 23, 2005 @ 4:34 pm

[...] Business strategy, Macroeconomics — JD @ 4:34 pm

I have talked about how oil prices may completely derail all your strategic planning and how to deal with out-of-control oil prices. I [...]

Pingback by iProceed - Better Strategy, Better Business » Impact of interest rate hike on businesses on June 30, 2005 @ 4:43 pm

[...] n more in the near future), higher interest rates curtail spending. The Fed admitted that energy prices have risen further, but argues that the expansion remains firm and labor market conditions conti [...]

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