Sourcing Guy

They may only be bumping up against it now, but oil prices will soon hit and exceed $100 per barrel, and prices aren’t likely to drop substantially for the forseeable future. The reason for that is summed up in two countries: China and India.

Increased competition for the scarce oil from developing nations such as India and China are likely to keep the pressure on the price of oil for some time. Smart buyers who have watched the price go up have already created category strategies and relationships with their supply chain to manage the higher costs. Those who have not may be forced to look for strategic alternatives in energy and some raw materials in order to survive.

The $100 benchmark will significantly impact the Michigan, U.S. and global economies. The triple-digit price has a huge psychological impact that will affect consumers as well as every buyer throughout the supply chains that create consumer products. If they haven’t paid enough attention to the rising cost of fuel, the $100 mark is a loud wakeup call.

Buyers in every industry will be making cost containment an even higher priority than it has been, because oil provides more than just energy and fuel for shipping products. Industrial buyers will be encountering significantly higher costs for freight, plastics, chemicals, steel and travel.