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This week you may have noticed that Oil prices have been pushing up towards $125 per barrel. But did you catch the headlines that oil is predicted by Goldman Sachs to hit $150 and then $200 per barrel over the next 24 months?
You think logistics and transportation costs are difficult to manage now, consider what will happen if the price of oil in American dollars doubles. There are four very real scenarios that are driving this problem.
- The value of the dollar and the ability to purchase oil and commodities is dropping every day.
- Instability in the Middle East and Africa is getting worse every day from Afghanistan to Iran to Iraq to Syria to Somalia and Nigeria and Zimbabwe.
- Demand for Oil continues to grow world wide especially as other countries continue to grow at 5% a year. They are using more oil and energy and the products they consume from China are causing high growth there as well.
- Speculators are continuing to push the prices up as well trading in and out of the market, which keeps the market fluid but has had the mid term effect over the last 2 years of pushing the oil price up continually.
Bringing this back to a relative level, consider that if Truckers have to park their trucks for loads paying $2 a mile or less when oil is at $100 a barrel, consider that they may not be able to move freight for less than $4 or $5 a mile if oil its $150 or $200 a barrel.
How will that impact your costs, operations, or even your logistics choices if you try and push some long haul freight to trains or even boats?
Will JIT out the window with the value of the dollar?
Will we need to put our national logistics leaders through an oil based drug rehab program to teach them new methods of moving freight efficiently?