Oil prices started to become a concern in 2005 and 2006 when they rose from roughly the $40-50 per barrel range into the $70s. This caused much angst, accelerated the nearly decade long rise in U.S. logistics costs as a percent of GDP, and had many companies here and around the world complaining about the growing costs of transportation and input costs.
Then, in 2007, Goldman Sachs analysts said we were heading for $100 per barrel oil. At the time, it seemed as if the sky was falling. Many thought the global economy would come to crashing halt, there would be blood on the streets, etc.
We got close to $100 for several months at the end 2007, finally moving above $100 early in 2008, after which the price kept rising to the July peak. There were new predictions for $200 per barrel oil. During those times, anything -- some pipeline had to be shut off in Nigeria for a few days -- seemed to send prices strongly upward. Many were blaming "speculators" bidding on oil futures from the pits at the mercantile exchanges for the price surge.
But starting in August, we saw oil prices rapidly falling under its own weight and the recession that was already in full swing (even if we didn't know it), then collapsing with the financial crisis to under $40 per barrel in March of 2009.
So here were are in 2011, and we are back to $100. It's news, but not the same level of news as it was just a few years ago. Why is that? Is it because we have been there and found it really wasn't quite as big a disaster as we thought it would be? Or that $100 just seems not all that high when we know we can get to $147?
So, my quick summary: I think we are going higher and could easily see $120 oil before long. Logistics managers really need to be looking at their budgets and discussing the potential scenarios with executives. Relook at strategies and policies on fuel surcharges. I am not an expert on hedging, and it could be dangerous at these levels if prices drop back down, but I would at least consider the cost/benefits.
We will hear more and more companies in 2011 citing rising oil prices as pressuring profits, as Nike recently has. Logistics costs and pressures once again move to center stage -- both good and bad for those of us in the business. "Green supply chain strategies" get re-invigorated not for green reasons but due to these cost pressure.
And maybe rising prices push us to trucks and then cars that are powered by natural gas -- abundant in the U.S., clean, and cheap -- to largely get us out of this mess.