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Energy Prices Decline, But Not Companies' Energy Worries

  • Energy Prices Decline, But Not Companies' Energy WorriesThe Find: The price of a barrel of oil may now be less than half of its record high this summer, but companies across the globe are continuing to work at cutting fuel costs and planning for an uncertain energy future.
  • The Source: An in-depth article in the Stanford Graduate Business School Knowledgebase.
The Takeaway: Sure energy prices are way down again as recession squeezes the global economy, but don't think that just because the immediate price pressure is off, your competitors aren't continuing to grapple with how to better use energy. "I guarantee that every major international [company] is working on this," says Michael Marks, previous head of Flextronics, and now a lecturer at the Stanford Business School.

With the cost of shipping a container from Shanghai to the East Coast now $8,000, compared to $3,000 in 2000, according to analysts Jeff Rubin and Benjamin Tal of CIBC World Markets, the first order of business for many companies has been reconsidering where things are made. Tesla Motors, for example, has shifted the manufacture of 1,000 pound battery units from Thailand to California, where the cars are assembled, in order to trim shipping costs. This is the future, says Stanford professor Hau Lee, an expert on supply chains:

What Lee calls a mixed strategy--in which a company builds a bare bones or base product in one location close to existing suppliers, and then ships it to a second location for final assembly--is gaining ground.
But moving manufacturing facilities is only the tip of the iceberg. Stanford lecturer and former Intel Chairman Andy Grove believes companies will also need to grapple with the rapid rise of disruptive new energy technologies, while other experts warn firms to ponder how possible changes to the tax code may shape the energy landscape.

The Knowledgebase article lays out the variables in depth, leaving the reader with one certain conclusion: when it comes to the future of energy, uncertainty rules and complacency will cost you.

The Question: Has your company done enough to plan or prepare for a shifting energy landscape?

(Image of container ship by jdnx, CC 2.0)

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