At Harbert: How We Think
WORKING AGAINST ENERGY INDUSTRY WON'T SOLVE THE PROBLEM E arlier this year, the marketplace faced a perfect storm regarding oil and gas prices. We saw a rebound in world economic growth and related oil demand following tremendous downtime. Seasonal usage rose, and decisions by the Biden administration eliminated the U.S.’s energy independence in 2021. Doing so puts us in a position where we are dependent on foreign sourcing. Supply chain disruption impacted prices early. The trucking crisis remains an issue that the industry is working to cure. Industry-based production agreements for supply management (OPEC) keep us in a precarious position, driving and holding prices higher. Similar to Canada in 2018, interventionism in “free” markets has hit a new high in the U.S. and is likely the most significant driver of higher prices. Interventionism is also a crucial cause of inflation, reducing the dollar’s value and hurting the customer’s ability to buy anything, including fuel. Starting with their first day in office, the Biden administration took an adversarial position versus the oil and gas industry. They should repair those relationships. Attempting to lower gas prices without expanding U.S. exploration and production is not a viable long-term strategy if we want prices to come down. Moves like invoking the Defense Production Act to accelerate domestic solar panel production will not move the needle. In the U.S., the entities making the most significant strides toward alternative energy are the same companies that produce/market oil and gas. These companies know they cannot focus on the fossil fuel business forever. We should go all-in on all forms of energy. Use funds generated from the sale of fossil fuels to support green energy expansion. It is self-defeating to develop strategies of going “cold turkey” on fossil fuels before we have a
legitimate support system developed. Washington should stop sending signals to the market that they are not supporting the energy business, or the prices will never come down. Customers are not the biggest issue. The problem is that the supply chain cannot stop and will not have alternative energy as a legitimate substitute for some time. Every time the fuel price goes up, so does the cost of transportation, refrigeration, lighting and other supporting processes. Working against rather than with industry will not put the country in a better energy position. Let’s hope it doesn’t take leadership much longer to figure that out.
GLENN RICHEY Harbert Eminent Scholar and Chair Department of Supply Chain Management
16 Harbert Business, Fall 2022
Powered by FlippingBook