Supply Chain Comment: The Start of Demand Destruction for Oil?

Preparing now for the Changing Energy World of the Future

Are we seeing the first phase of demand destruction for oil?

I was talking with a colleague this week about peak oil accelerating the desire of organizations to craft lean supply chains. Research suggests that rising oil prices impact supply chain dynamics in manners that are best understood through total landed cost analysis and network optimization studies.

Some studies, including those published by SCDigest, suggest that oil at $150 a barrel is the tipping point where transportation costs can overwhelm the low labor costs in far away countries; the result is a total landed cost calculation that favors production and distribution facilities close to the customer.

The price of oil hit $147 a barrel in the summer of 2008 with many organizations feeling enormous pressures on their cost structures; some could have been at that tipping point where they have an inherently uncompetitive supply chain.

Let