Word on the street is that, come 2012, $5 may be a commonplace price for a gallon of gasoline in the United States. Specifically, John Hofmeister, the former president of Shell Oil, made the claim in a widely circulated interview yesterday.
The primary reason, he argues, is simply the enormous growth in demand (from China & India especially) coupled with some degree of economic recovery over the course of 2011. I’m inclined to believe him on that. He also goes on to blame US politicians for not opening up more areas for drilling. I’m inclined to downplay that part (what would ANWR save? A nickel?). Regardless, with gas already much higher than it was this time last year, an upward trend seems more likely than the opposite.
The question remains then: What are you going to do to make sure your business can keep thriving?
Obviously the answer depends radically on the type of business. A delivery service is going to face major cost increases, whereas companies which are built on providing efficiency solutions (take ATDynamics for example) stand to benefit hugely form high gas prices. But there are probably some generic rules of thumb to work with:
1) Assume this trend isn’t going away any time soon.
Five dollars seems like a lot, but the price of most traditional energy sources is bound to keep rising. Assume a $5 price and then redo calculations – particularly as it pertains to capital expenditures like fleets of vehicles.
2) Employees need a hand.
Employees are often hit particularly hard by high gas prices. Can yours bike to work? Is it encouraged or celebrated? Is your office located in a convenient downtown location or in a fringe parking lot?
3) Efficiency = profit
Penny saved, penny earned. Remember when UPS eliminated most left-turns? Although it took complicated software, it’s exactly the kind of genius idea that could turn up anywhere if you know where to look.
4) Location, Location, Location…
Are you located in a far flung suburb requiring long commutes and delivery times? Perhaps that should be reconsidered?
5) Embrace Innovation
One of the good things about high gas prices is that they’ll drive innovation into other fuel sources and other modes of transportation. There are countless business opportunities to be had making it easier for people to avoid driving. Diversify and find the aspect of your business affected least by gas prices and see if there are expansion opportunities there. Or start something new!
I’ll be digging into this issue a little deeper in the coming weeks! What are some other ways to mitigate or even profit from higher gas prices?