Oil Reality Check: It’s Going Higher

Mills, M. (2010). Oil reality check: It’s going higher. Retrieved April 5, 2010 from: http://www.forbes.com/2010/04/05/transocean-schlumberger-crude-oil-intelligent-investing-mark-mills.html?feed=rss_home

This opinion piece was written by physicist and writer, Mark Mills, and is published on Frobes.com Web site. Mills believes that oil prices will be going back to levels seen in the summer of 2008, which was prior to the “Great Recession” that has helped to hold prices down in the past couple of years. He states that as the world’s economies improve demand will go up and supply cannot increase to meet the demand. Short of another event that causes an economic disaster, prices have to go up substantially. The problem is that there are no quick fixes to a shortage on the supply side and the only way to deal with the problem on the demand side would be for consumers to reduce their demand or for them to find alternatives, neither option is likely in the short term. This is important information for managers to know and understand because higher gasoline prices affect businesses in many ways. First, it increases operating costs for most businesses and causes prices of supplies and services to increase as well. Secondly, consumers get hit hard with high prices and have to make up the difference somewhere else by cutting spending on discretionary items and services. Managers should shield their business from these types of fluctuations as much as possible by taking proactive money-saving steps now that will pay off in the future.