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Transportation news: CSCMP speaker hones in on future oil and gas trends

By Jeff Berman, Group News Editor
October 06, 2010

Even though oil and prices are still relatively in check despite recent increases, the fact remains that the current rate of diesel consumption is not foreseeable in the future, according to Chuck Taylor, founder and principal of Awake! Consulting, an organization that encourages supply chain professionals to play active roles in shaping national energy policy.

Speaking at the Council of Supply Chain Management Professionals Annual Conference in San Diego last week, Taylor said that for the first time in its history the United States will be forced to increase economic growth while decreasing oil consumption, which, he said, is something that has never happened before.

“This is something that has serious implications for the prosperity of global supply chains,” said Taylor. “There are many who say that cannot be done…and that we are in for a permanent decline, but I don’t agree with that.”

And those who study and keep a close eye on supply chain management know there are viable opportunities for reducing fossil fuel usage and focusing on conservation, said Taylor.

In 2006 when the price of a barrel of oil was around $40, Taylor explained to CSCMP attendees that he was “early in his preaching” about how supply chain stakeholders approached energy prices.

“Cheap oil is what runs global supply chains and keep things moving,” said Taylor. “What we are in for in the future is not complicated. There are no alternatives to fossil fuel in the immediate future; 95 percent of the world’s transportation moves on oil.”

What’s more, with the world currently using 86 million barrels of oil per day, Taylor said that future production is not likely to keep up with demand. To back this up, he explained that the U.S. Department of Energy predicted in 2007 that by the year 2030 the world will be producing 118 million barrels of oil per day.

But since then that estimate has been dropped to 104 million barrels per day. And the current 86 million tally is expected to increase to 92 million barrels by 2020, which is less than 1 percent growth per year, which Taylor said will not keep up with demand.

And while diesel and oil prices are not near the record highs seen in 2008, Taylor said it is clear that cheap gasoline will not last, especially with few alternatives at the present time.

“It appears at times that people think we are entitled to cheap gasoline, but that is not the case,” said Taylor.

Just In Time supply chains, which are dependent on global transportation are likely to be impacted first when production lags demand, according to Taylor. This rings true, considering that 50 percent of total supply chain costs go towards transportation, he said.

About the Author

Jeff Berman headshot
Jeff Berman
Group News Editor

Jeff Berman is Group News Editor for Logistics Management, Modern Materials Handling, and Supply Chain Management Review. Jeff works and lives in Cape Elizabeth, Maine, where he covers all aspects of the supply chain, logistics, freight transportation, and materials handling sectors on a daily basis. .(JavaScript must be enabled to view this email address).

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